Let’s fund an improving NHS – here’s a progressive way to do it

The NHS is one of the worlds biggest enterprises and us such it requires adequate and complete funding security. This can only come from an appropriate means of collecting income from the Service’s beneficiaries – we the citizens of the United Kingdom.

At present that income comes primarily from The Treasury whose principal means of raising revenue are taxes and borrowings. Taxes ultimately we pay. Similarly the cost of borrowing – servicing debt. Some taxes are progressive – the wealthier the taxpayer is the more they pay. Some taxes are regressive, the poor pay the same as the rich.

This means as far as the NHS is concerned the poorer you are the higher the percentage of your income you pay for the service. If we maintain the principle that the NHS is “free” at the point of consumption, but maintain the current structure of funding, then we are implicitly accepting that indirectly the poor pay more for healthcare than the rich.

The element of regressive indirect taxation in the Treasury’s income ensures that this is the case. This is, of course, true of all national expenditure, not just the Health Service. It is possible to devise a model in which healthcare funding is progressive – income and/or wealth related. This would be more than creative accounting – it would be socially just.

One way to do this would be to introduce a Healthcare tax separate from Income tax but far more progressive. This would help make NHS costs explicit and improve their management. To make this work there would have to be no cross funding from general taxation. So, for example, if the cost of the NHS was increasing more than general inflation Government would seek buy in from the public at large to increase the Healthcare tax appropriately.

If this Healthcare tax is truly progressive the wealthier taxpayers would fund budget increases more than the poorer – potentially much more. The social merits of this are obvious and whilst it discriminates against one section of the community there is a natural justice in this.

But let’s be clear. This proposal does not mean lack of controls on NHS spending. Rather the reverse. By making NHS costs very explicit, and by making a direct link to funding, debate would be facilitated. “Yes we can do that , but it would mean a 1% rise in the Healthcare Tax” is a constructive debate – surely an improvement on the current lack of debate and polarisation of positions.

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