The NHS needs a reliable source of income. Here’s where to find it

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By Norman Warner and John Oldham

From properly taxing tech giants to levies on property owned by overseas firms – there are ways to fund our health service

But even if it became much more efficient and worked more effectively with its sister service, adult social care, this would not resolve a fundamental problem. This is that in today’s world a tax-funded, pooled-risk healthcare system such as the NHS that is free at the point of clinical need requires a more generous funding system than we currently provide or are contemplating. The inconvenient truth for politicians and public alike is that if, as a country, we want an NHS of the kind we like, we have to agree collectively on a more generous and reliable funding system.

Facing up to this inconvenient truth is tough for everybody. It is much more comfortable, especially politically, to believe everything will be OK if we just get a bit more efficient, use more technology, integrate health and social care and get some more doctors and nurses. Of course we need to do these things. The NHS England Five Year Forward view and related initiatives are important steps in the right direction. So is the move to better integration of services, especially between the NHS and social care. Getting more of our services provided in the community and using technology are critical to the NHS’s future.

We do need to tackle the huge variation in the cost and quality of care around the country: narrowing this variation could save about £3-5bn a year. But this takes time, and you cannot expect hard-pressed staff to make dozens and dozens of changes all at once. There needs to be a laser-like focus on three to four national priorities at a time, and when these are locked in we can move on to the next items on the efficiency agenda. We do need to integrate health and care budgets, nationally and locally. This will improve efficiency and patient experience, but it is not a financial panacea.

The health and care system does need to work more effectively with patients to co-produce better health and wellbeing. Most people with a chronic condition spend nearly 8,000 hours a year managing it on their own, interfacing with professionals for about four of these hours. Yet 99.9% of effort, planning and energy by the care system focuses on those four hours. And, unsurprisingly, when that system fails, patients are rushed into expensive and often inappropriate acute hospital care.

For most of these changes to work still requires more investment – capital and revenue – a fact that has not been faced up to. Moreover, in themselves they will not reduce by much the unrelenting increase in demand that the health and care system will face over the next two decades. The approximate annual cost of that demand increase is in the region of a 3-4% annual real-terms increase in funding. This is a good deal more than the 1.5% increase that has been provided to the NHS since 2010 and the 10 to 15% reduction in adult social care spend over the same period.

Future funding streams to deal with the gaps described above need to be from sources that will be continuous. It is difficult to see how the tradition of just increasing general taxation can do this. The top 10% of earners pay 59% of total income tax receipts, the top 1% some 27%. Experience and economic theory demonstrates that mining this source further is unlikely to release the funds needed.

We suggest the following principles should apply to sourcing new revenue for the NHS and care system. A new tax base for the gig economy needs to be created. The older population should pay a fairer share of the costs. Lifestyles costly to the NHS and care system should exact a premium. And tax-reduction schemes should be tackled.

Our suggestions adhere to these principles. The UK-derived sales revenue for Amazon, Google, eBay and Apple was some £29.4bn in 2016-17 (according to our analysis of their published data). Yet very little tax is paid. A 10% revenue tax on UK sales would yield £2.4bn minimally. Revenue in these companies has achieved double-digit annual growth, and the tax take would rise in parallel.

Three hundred thousand retired people receiving a pension are higher rate taxpayers; they are relatively well-off. Yet they also receive winter fuel allowance and other state benefits. If they did not receive basic state pension or winter fuel allowance, £1.95bn a year would be generated annually, which would also be index linked.

Overseas companies, 25% in the British Virgin Islands, own £55 billion of UK property. A 5% tax on land registry value would gain £2.75 billion and could be inflation proofed. A higher tax on sugary drinks (20%), minimum alcohol pricing, and higher rate VAT for unhealthy food (definitions exist) could raise a further £1-2bn a year. Collectively the suggestions we make would deliver £8.5bn a year recurrently.

There are, of course, other revenue sources that can be considered, for example revamping inheritance tax, which is likely to bias revenue from wealthier people and those who have been higher users of the care system. We do not claim a monopoly of ideas.

Ah, we hear you say, this is all pie in the sky and politically impossible. Well, maybe. But let us consider the alternative to some radical action on a more generous and reliable funding scheme for our health and care system.

Winter pressures become all-year pressures. Access to care deteriorates at a rate of knots. Premature death rates among both young and old rise. We slide down the international league tables in terms of healthcare performance. A trajectory towards care and treatment mediocrity gains greater momentum despite the best efforts of staff. More staff leave the NHS and young people stop going into the UK healthcare professions because the pressures, working conditions and pay get increasingly worse. EU health professionals stop working in the UK after Brexit, and the so-called Brexit financial dividend proves a mirage.

We are already seeing these things happen, and the situation will worsen unless we have a serious national conversation about how we realistically fund the NHS and social care. This has to be led by our politicians across the political parties. So let’s encourage them to engage with the inconvenient truths instead of hiding from them.

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