NHS Finance


Taxes must rise by at least 4% to prevent NHS deterioration as ‘no savings left to make’

A taxation increase of at least 4% a year is necessary to prevent “unnecessary costs, inefficiencies and uncertainty” and improve quality of care in the NHS, a major report has argued today.

The Institute for Fiscal Studies (IFS) and the Health Foundation’s collaboration into looking at the current and future state of the nation’s health found that the NHS would need as much as £2,000 from each household every year for the next 15 years to meet growing health demands of the population.

The report noted that social care funding is also a key priority, with an increase of 3.9% needed a year to cope with demand from an ageing population and “the burden of chronic disease,” both of which could put additional stress on an already struggling service.

The authors of the study claimed that there was “no room to cut other big areas of spending” in areas such as defence or the housing budget, and added it was hard to imagine raising this kind of money without increases in at least one of the three biggest taxes – income tax, National Insurance and VAT.

“If we want even to maintain health and social care provision at current levels, taxes will have to rise,” they said.

“If we are to have a health and care system that meets the expectations of the population, we need to understand how and why spending has risen over time, where the money is spent, how costs are likely to develop in the future, and how we might go about meeting those costs.”

Interestingly, the report found that since 2010 measured productivity in the health service has been growing faster than productivity across the economy as whole.

Responding to the study, NHS Providers deputy chief executive Saffron Cordery said: “This report confirms there are some big choices to make – how much the NHS needs versus how much we can afford; how any increases in NHS funding should be paid for; and how we support a social care system now in crisis.”

Cordery noted that there will need to be “substantial increased spending” to fill in the gaps that have emerged due to shortfalls in resources.

“Trusts want to improve standards of care as part of an exciting version of the NHS for the future, but that vision must be rooted in reality. We must not repeat past mistakes of creating national plans with unrealistic expectations that cannot be delivered,” she added.

Paul Johnson, director of IFS and an author of the report, also commented: “We are finally coming face to face with one of the biggest choices in a generation.

“If we are to have a health and social care system which meets our needs and aspirations, we will have to pay a lot more for it over the next 15 years. This time we won’t be able to rely on cutting spending elsewhere – we will have to pay more in tax.”

Chief executive of the NHS Confederation said: "This report is a wake-up call. And its message is simple - if we want good, effective and safe services, we will have to find the resources to pay for them.

"The report suggests this can be paid for through additional taxation. But we hope the Government will not rush into decisions or promises without consulting those who work in and use these services. It should be agreed following a national conversation with a clear investment and workforce strategy, alongside commitments from the NHS and care services about what will be delivered in return."

Earlier this year Theresa May promised to create a long-term funding plan for the NHS. The PM is expected to take action after a winter of unprecedented demand put pressures on the nation’s health providers.

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