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17 April 2018updated 09 Sep 2021 4:30pm

To save the NHS, we need a ring-fenced tax

The Liberal Democrat spokesperson for health explains why her party are proposing a health and social care tax. 

No one can be in any doubt that a crisis has been unfolding in our NHS and social care services in recent months. The reports of cancelled operations, patients stranded on trollies, treatment standards reduced and ambulances queuing for hours outside A&E departments have been relentless. And while the headlines and the statistics are bad enough, the personal toll on the patients seeking treatment and the staff working in these conditions is more horrifying still.

Needless to say, this adds yet more weight to the already overwhelming case to give the NHS and social care more funding. Even Theresa May, who only a couple of months ago was claiming the NHS was “better prepared for the winter than ever before”, now appears to have conceded that her government can no longer bury their heads in the sand and pretend that services are not close to breaking point. 

In the 2017 general election, the Liberal Democrats proposed increasing income tax by a penny in the pound. This would generate estimated additional revenue of £6bn, to be ring-fenced and spent only on health and social care.

It is well known that the NHS chief executive, Simon Stevens, called for the government to give the NHS in England at least £4bn more in 2018-19. Social care faces a funding gap of just over £2bn by 2020. So, the amount raised by this tax increase could put both these vital services back on a stable footing.

No political party takes the decision lightly to go into a general election telling voters that they want them to pay more tax. But I am proud that we were prepared to be honest with the public about the tough decisions needed to safeguard services in the longer term. The question of how we manage the growing pressure on our NHS and social care is arguably the biggest domestic crisis facing the country. To resolve it, we all need to chip in a little more.

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While I don’t underestimate the impact of asking anyone on a stretched household budget to pay more tax, this is a far fairer option for raising this much-needed money than the alternatives. 

Thanks to increases in the income tax personal allowance fought for by the Liberal Democrats during the Coalition no one pays income tax on the first £11,500 they earn, so this will not hit the lowest earners. And of course, at the other end of the income scale, the more people earn the more they will pay.

Contrast this with the government’s approach, to date, of trying to plaster over the cracks in social care by allowing local authorities to raise additional revenue through a “social care precept” – a ring-fenced council tax increase. There have been myriad problems with this. Council tax is known to be unprogressive, as it takes no account of ability to pay (with the exception of council tax benefit) and is based on extremely blunt and outdated measures of property values. 

This system also risks exacerbating the postcode lottery in services, with the least affluent areas (where, as a general rule, we would expect there to be the highest need) being able to raise the least through the precept. Thirdly, the amount which was raised by the precept to date has simply been far too little to bridge the funding gap. 

Our health system will only work if we get social care right. We need to have a conversation about paying for care when we get old. It is not free, like the NHS. It is means-tested, and includes the value of your home. For many this comes as a huge surprise, especially if they live within the M25 where care home fees can be in excess of £1,000 a week. 

During the coalition period Lib Dem ministers in the Department of Health proposed that there should be a cap on what we will be required to pay. The Conservative government has promised a green paper on this issue, first in the autumn of 2017, then after Christmas and now “in the summer”, but it is rumoured that it is proving to be “difficult” and it will be towards the end of the summer recess.

While there is certainly no magic wand to fix the growing need for NHS services, underfunding and staff shortages, we need to be prepared to look at bold solutions and to be honest with the public about the scale of these challenges. In the longer term, the Liberal Democrats want to see a move towards a single earmarked tax, bringing together the entire health and care budget, and based on a remodelled version of national insurance. 

We have also urged the government to launch a cross-party commission to review the funding settlement for the NHS and social care in the longer term, working with patients, the public, and NHS and care staff. 

To oversee the future sustainability of NHS and care budgets, we also strongly advocate the establishment of an Office of Budget Responsibility for Health, which would make recommendations to government about the funding required for a fixed period, just as the current OBR does for the economy and public finances. Their considerations should take account of the costs of meeting projected demand for services and of meeting any new policy commitments by the government.

We simply cannot get to this time next year and have our NHS battling through another winter crisis as bad as this one has been – or worse. If they are serious about protecting these vital services on which we all rely, policymakers from every party must be prepared to sit around a table and take some tough decisions. We wait with bated breath.

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