The New Statesman’s rolling politics blog

RSS

A tax rise for the NHS would be good policy and politics for Labour

By promising to save the most popular public service from a funding crisis, Miliband can craft a potent dividing line with the Tories.

By promising to save the most popular public service from a funding crisis, Miliband can put the Tories on the backfoot.
Ed Miliband speaks with radiotherapists, during his visit to University College hospital, on April 4, 2011 in London. Photograph: Getty Images.

If Labour is to win the general election, it will need the NHS to be one of the dominant themes of the campaign. Unlike on issues such as immigration, welfare and the deficit, it enjoys a consistent double-digit lead over the Conservatives and can point to an unambiguous record of success in government (it left office with NHS satisfaction at a record high). As one shadow cabinet minister told me recently: "The more people talk about the NHS, the better Labour does". 

But if the party is to credibly address the future of the health service it will need to confront the looming funding crisis. Contrary to the common view that it has been shielded from austerity, the NHS is currently enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the current Spending Review it will rise by an average of just 0.5 per cent. As a result, in the words of a recent Social Market Foundation paper, there has been "an effective cut of £16bn from the health budget in terms of what patients expect the NHS to deliver". Should the NHS receive flat real-terms settlements for the three years from 2015-16, this cut will increase to £34bn or 23 per cent. In the last year, the number of foundation trusts in financial trouble has nearly doubled from 21 to to 39. By the time of the general election, as many as two-thirds could be in the red. 

To date, Labour has emphasised that it will focus on maximising efficiency by ending the dogmatic privatisation of services (which, as former NHS head David Nicholson said, has left the service "bogged down in a morass of competition law") and by integrating health and social care (which Monitor estimates could save up to £6bn).

As Andy Burnham told me when I interviewed him earlier this year: "The reason I’ve outlined the policy that I have is that I can’t make any assumptions about new money, I can’t, I’m just being honest. I’ve got to assume that things are going to be very tight and it’s that reality, that financial outlook, that makes me look at going very deeply into integration. Before anybody asks the public for more money, any politician of any party, you’ve got to be able to look the public in the eye and say 'are we getting the best we possibly can, the most we possibly can, from what the public are already giving us for the health and care system?' I don’t believe we can do that at the moment."

But the question of new funding cannot be indefinitely postponed. It is for this reason, as today's Independent reports, that the shadow cabinet is examining how the party could promise a significant increase in NHS spending at the election. The most popular option is a hypothecated rise in National Insurance (NI). When Gordon Brown increased the tax by 1 per cent in his 2002 Budget to fund higher NHS spending, Tony Blair and others feared the move would be disastrous. But it proved to be a political coup, creating a potent dividing line with the Tories and securing the health service's future for the next decade. Ed Miliband, who helped to design the policy as a special adviser to Brown, later described it as the proudest moment of his career. Recalling this success, Frank Field and others are publicly urging Labour to raise NI again (perhaps rebranding it entirely as an "NHS tax"). 

Field tells the Independent: "I can’t tell you what a good meeting I had with Ed Balls. He knew all the right questions. He was brilliant. I have been discussing this with John Cruddas for some time and he is happy with it...We are not pretending that the NHS can be saved through efficiencies nor that increased funding will not be accompanied by serious reform. By God, it has to be. But there won’t be much left to reform if we don’t do it."

But Labour's past experience of pre-election tax promises (most notably in 1992) and the living standards crisis that it has done so much to draw attention to, means that many are anxious about asking any group other than the very richest to contribute more. A pledge to raise NI would gift the Tories to chance to run a classic 1992-style "tax bombshell" campaign and accuse the party of planning to squeeze "hardworking families". 

Yet this is a political obstacle to be overcome, not to be avoided. As a ComRes poll found last year, health is the most popular spending area among voters. Just 5 per cent believe the NHS budget should be reduced and 71 per cent believe it should be increased. And as Brown's experience in 2002 demonstrated, voters are realistic enough to know that they cannot have something for nothing. By seizing the initiative on tax, Labour will in turn be able to accuse the Tories of planning an "NHS bombshell" under which the service collapses for want of funds. Having made so much of his commitment to our "national religion", Cameron will have no reasonable response. With the polls narrowing as the economy recovers, the time has come to resurrect those dividing lines. 

Next Article