A vision for the NHS at 80

70 years ago today, the NHS was founded on the principles of equity and universalism. The new health service would be available to all. It would be funded through taxation, so that services became available to everyone, as opposed to only those able to afford insurance. The British public remains proud of the NHS and what it stands for: a country that values dealing fairly with the risk and uncertainty of ill health, by collectively caring for all its citizens.

However, although it is currently enjoying an unprecedented level of public support, the NHS has been struggling due to severe underfunding and increasing demand. As a birthday present, the government has announced an additional £20 billion in annual funding for the NHS, to be fully implemented in five years’ time.

70 years ago, Britain also witnessed the foundations of social care in the UK, although this birthday is passing with less fanfare. 1948 saw the creation of the National Assistance Act, the origin of social care provision in England and the subsequent development of the welfare state. Unlike the NHS, social care is means tested through an increasingly ungenerous system – an inequitable solution that does not meet the needs of many people, particularly those on lower incomes, as a lack resources mean that social workers have to ration their care. 23% of over 65s on the lowest income bracket need help with daily activities but do not receive it; compared to 8% of those in the highest. Significant cuts in social care funding have exacerbated the problem and are now putting pressure on the NHS. The number of bed days lost due to social care-related delays in discharging patients from hospital rose by nearly 50% between 2015 and 2017.

However, although it is currently enjoying an unprecedented level of public support, the NHS has been struggling due to severe underfunding and increasing demand. 

Experts agree that £20 billion is not nearly enough to improve the NHS, let alone social care (although it should be noted that the financial settlement is only intended for the NHS; the government has not made its plans for social care clear yet). It will merely maintain current quality and access standards despite an ageing population and growing burden of chronic disease. It will not account for improvements in quality of care, improving treatment rates of mental health towards parity of esteem, investment in infrastructure or investment in health creation in communities.

To modernise and improve our health and care system to maintain current standards of care for all, we need at least an additional £32 billion by 2023, rising to an estimated £64 billion in 2033 – 34. We will need additional funding to move beyond our means-tested and heavily rationed social care system. The majority of this funding should come from reformation of the tax system and keep to the progressive and revolutionary principles and values of the NHS, giving Britain something to be truly proud of.

Tax reform for a modern health and care system

The government has indicated that this additional funding will come from a combination of tax increases, economic growth and a ​‘Brexit dividend’. The ​‘Brexit d ividend’ has been widely debunked, and economic growth is not forecasted to be strong for the next few years, so the majority of the funding must therefore come from increased rates of taxation.

The government has stated that this will be ​‘fair and balanced’ but have not yet clarified their vision for how this will work.

Our current tax system is complicated and confusing. Britain’s tax code is 17,000 pages long – the longest in the world. An average person in Britain pays tax on: i) their earned income (personal income tax and a National Insurance Contribution); and ii) taxes on consumption, (including VAT and council tax – effectively a tax on the consumption of housing).

It is also inequitable. Most people would agree that as you earn more, you should pay a higher rate of tax. But those earning the least pay twice as much as a proportion of their income compared to those earning the most. (The bottom decile of households pay more in indirect and direct tax as a proportion of their income, compared to the top).

And we barely tax wealth at all – despite wealth doubling as a percentage of the economy since the 1980s, only 4% of tax is raised from wealth.

It would be counterproductive to further burden the poorest households. There is a significant link between poverty and ill-health. Research at JRF has estimated that additional healthcare spending associated with poverty accounts for around £29 billion per year. 

We should not be funding a health system by increasing the burden on those who can least afford to pay.

We should not be funding a health system by increasing the burden on those who can least afford to pay. Instead we should focus on progressive options that will share the burden equitably.

In the longer term, significantly increasing the taxation of wealth, including through taxation of inheritance, capital gains, dividend income and property ownership, will all be needed to maintain the NHS through progressive funding.

However, taxation of income will also need to contribute. In the immediate term, NEF has proposed a practical and progressive first step, which could be implemented reasonably quickly and easily: make sure the richest pay the same rate of national insurance as everyone else. Removing the ​‘upper earnings limit’ of national insurance would raise £11.1 billion per year by 2023/​24, in today’s prices. At present, earnings above £892 per week, equivalent to around £46,400 per year, are charged just 2% in National Insurance Contributions. But the contribution is much higher proportionally for earnings above only £8,400 a year. Contracted employees pay 12% and the self-employed pay 9%. Abolishing the Upper Earnings Limit would make sure that the richest 15% of taxpayers contribute just as much proportionally to the NHS as everybody else.

This would get us more than half of the £20 billion the government has promised and approximately a third of the money actually needed to create a modern and supportive health system. In order to raise the rest, we should consider further reforming our outdated tax system. In the short term, we do have a variety of options to raise further revenue, including an increase in personal income tax, or freezing thresholds for higher tax. However, such options are regressive and amount to tinkering with a system that is not fit for purpose.

What kind of a health and care system do we want on the NHS’ 80th birthday?

We are currently at a crossroads. We can choose to stick with the status quo, tinkering with tax allowances to keep the NHS ticking over. Or we can reform our tax system to allow our full health and care system to be fairly and transparently funded. This is ambitious, but it is an ambition worthy of the original principles on which we founded our much-loved institution 70 years ago.