What are the implications of earmarking taxation for the NHS? Photo: Getty
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Earmarking taxes for the NHS won’t guarantee more money for healthcare

By clearly linking a tax to overall spending on the NHS, it can help reconnect voters with the purpose of taxation, but makes healthcare spending vulnerable to macroeconomic shocks and cycles.

It is no secret that the NHS faces a huge funding shortfall. By 2020/21, the total health budget deficit could approach £30bn, up from £2bn in 2014/15. This has sparked a debate about how the funding gap could be narrowed, and renewed interest in the idea of hypothecating – or earmarking – taxation for the NHS.

Back in 2002, Gordon Brown increased National Insurance rates by 1p, and earmarked the revenues raised for increased NHS spending. Earlier this year, Labour MP Frank Field proposed repeating this policy, estimating that it would raise around £15bn by 2020/21 – or half of the predicted 2020 health budget deficit.

Nick Pearce, director of IPPR, also expressed support for the idea. He argues that an "NHS tax" or an increase in National Insurance could “play a significant – and immediate – role in reducing the funding gap”.

The thinking behind these proposals is that the public would be more likely to support a tax increase if they knew the additional funding was earmarked for the NHS. Indeed, a poll by Guardian/ICM found 48 per cent of respondents were in favour of tax-funded spending increases in the NHS.

But, as CentreForum reveals in a new report, earmarking taxes for the NHS won’t necessarily guarantee more money for healthcare.

In the report, we study the merits of what is known as "strong hypothecation", where a particular tax (and only that tax) funds an entire service, and "weak hypothecation", where revenues are notionally earmarked for an area of government spending. It is the latter that is proposed by Frank Field and IPPR. But we conclude that the former is the more viable of the two.

Whereas strong hypothecation promotes transparency, accountability and trust in government, weak hypothecation has significant disadvantages. Chief among them is that it would not guarantee that an increase in an earmarked tax rate led to higher spending on the NHS.

The government could "borrow" earmarked revenues for other programmes, or it could vary the designated service’s tax funding from other sources, leaving overall spending on the NHS unchanged.

Furthermore, even if the government could show that the tax rise led to increased spending on the health service in the first year, it is unlikely that subsequent spending reviews would treat the earmarked revenue as additional to the NHS budget. As the Barker Commission recently noted, weak hypothecation is “a soft form of the idea, and one that may rapidly become a lie”.

Strong hypothecation, on the other hand, has some merits. By clearly linking a tax to overall spending on a particular service, it can help to reconnect voters with the purpose of taxation, and gives the public a sense of what a particular service costs.

On the flipside, strong hypothecation would make health spending dependent on macroeconomic shocks and cycles, rather than need or demand for services. This risks insufficient funding during economic downturns, and wasteful spending during booms.

During a recession demand for healthcare is likely to increase, just when the money available for the NHS is falling, and so strong hypothecation would offer little wriggle room in providing a health service that meets the public’s expectations.

It is important to note as well that there are conflicting political motives among proponents of hypothecated taxation. While advocates on the left support earmarked tax increases as a means of raising revenue for the NHS, proponents on the right consider it an opportunity for a fundamental rethink on how the NHS should be paid for.

Conservative peer and Times columnist Danny Finkelstein, for example, has emphasised the role that strong hypothecation could play in deciding “how much healthcare we should offer people free at the point of use”, indicating that the right’s solution to the NHS funding gap may well be at odds with the left’s.

Although earmarking taxes is not inherently right or wrong, politicians must be clear about the objectives and implications of hypothecating taxation for the NHS. Or they will very quickly run into political difficulty.

India Keable-Elliott is an economic researcher at CentreForum and author of the CentreForum report "Hypothecated taxation and the NHS"

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What David Hockney has to tell us about football

Why the sudden glut of blond footballers? A conversation I had with the artist back in 1966 gave me a clue. . .

In 1966, I went to interview David Hockney at a rather run-down flat in Bayswater, central London. He was 28 and had just won a gold medal at the Royal College of Art.

In his lavatory, I noticed a cut-out photograph from a newspaper of Denis Law scoring a goal. I asked if he was a football fan. He said no, he just liked Denis Law’s thighs.

The sub-editors cut that remark out of the story, to save any gossip or legal problems. In 1966 homosexual activity could still be an offence.

Hockney and a friend had recently been in the United States and had been watching an advert on TV that said “Blondes have more fun”. At two o’clock in the morning, slightly drunk, they both went out, bought some hair dye and became blond. Hockney decided to remain blond from then on, though he has naturally dark hair.

Is it true that blonds have more fun? Lionel Messi presumably thinks so, otherwise why has he greeted this brand-new season with that weird blond hair? We look at his face, his figure, his posture and we know it’s him – then we blink, thinking what the heck, does he realise some joker has been pouring stuff on his head?

He has always been such a staid, old-fashioned-looking lad, never messing around with his hair till now. Neymar, beside him, has gone even blonder, but somehow we expect it of him. He had foony hair even before he left Brazil.

Over here, blonds are popping up all over the shop. Most teams now have a born-again blondie. It must take a fortune for Marouane Fellaini of Man United to brighten up his hair, as he has so much. But it’s already fading. Cheapskate.

Mesut Özil of Arsenal held back, not going the full head, just bits of it, which I suspect is a clue to his wavering, hesitant personality. His colleague Aaron Ramsey has almost the full blond monty. Paul Pogba of Man United has a sort of blond streak, more like a marker pen than a makeover. His colleague Phil Jones has appeared blond, but he seems to have disappeared from the team sheet. Samir Nasri of Man City went startlingly blond, but is on loan to Seville, so we’re not able to enjoy his locks. And Didier Ndong of Sunderland is a striking blond, thanks to gallons of bleach.

Remember the Romanians in the 1998 World Cup? They suddenly appeared blond, every one of them. God, that was brilliant. One of my all-time best World Cup moments, and I was at Wembley in 1966.

So, why do they do it? Well, Hockney was right, in a sense. Not to have more fun – meaning more sex – because top footballers are more than well supplied, but because their normal working lives are on the whole devoid of fun.

They can’t stuff their faces with fast food, drink themselves stupid, stay up all night, take a few silly pills – which is what many of our healthy 25-year-old lads consider a reasonably fun evening. Nor can they spend all their millions on fun hols, such as skiing in the winter, a safari in the spring, or hang-gliding at the weekend. Prem players have to be so boringly sensible these days, or their foreign managers will be screaming at them in their funny foreign accents.

While not on the pitch, or training, which takes up only a few hours a day, the boredom is appalling, endlessly on planes or coaches or in some hotel that could be anywhere.

The only bright spot in the long days is to look in the mirror and think: “Hmm, I wonder what highlights would look like? I’ve done the beard and the tattoos. Now let’s go for blond. Wow, gorgeous.”

They influence each other, being simple souls, so when one dyes his hair, depending on where he is in the macho pecking order, others follow. They put in the day by looking at themselves. Harmless fun. Bless ’em.

But I expect all the faux blonds to have gone by Christmas. Along with Mourinho. I said that to myself the moment he arrived in Manchester, smirking away. Pep will see him off. OK then, let’s say Easter at the latest . . . 

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 22 September 2016 issue of the New Statesman, The New Times