We know the NHS in England is under financial pressure but…

Did we know that among the options being suggested to alleviate the pressure is a dedicated tax for the health service, which apparently will be transparent, easily understandable and less prone to political interference?

This is known as hypothecation, another example of which is the TV licence fee, which although not a tax per se, is a levy used solely to fund the BBC.

The idea of a hypothecated tax for health has been discussed by economists for many years, but has now been backed as at least one option to stem the shortfall in funds by a panel of health experts.Income tax and National Insurance (NI) are options, says the panel, but a dedicated health and care tax would offer “clear benefits”. It would “improve understanding of what health and care cost, and enhance transparency about how our taxes our used”. NI could be the basis for a new health and care tax. In other words, the current proceeds of NI would all be targeted at the NHS.

The yield currently to the government from NI is about £126bn annually, which is about the total spend on the NHS across the UK. The original purpose of NI after World War II, was to allow workers to “insure” themselves against sickness or other loss of earnings. Unfortunately, since then NI is now in effect an extension of income tax. The panel’s call for more money will hit taxpayers’ wallets, however it is levied.

The experts believe an extra £20bn is needed for the NHS in 2020 over and above current plans, with a few billion more needed for social care. That would represent a big hit on taxpayers, individual or corporate. The problems envisaged are that the chancellor’s flexibility over tax and public spending decisions is reduced if certain taxes are earmarked in advance for specific purposes. If in a recession the yield from a health and care tax is reduced, then spending on the NHS would have to fall.

Scotland also has its own tax-raising powers, and all the devolved nations make their own decisions about health spending, which would mean hypothecation would only work in England but involves UK wide tax revenue, making this suggestion extremely problematical.

However, is extra money for the NHS the issue?

A recent report from the regulator NHS Improvement said that health trusts in England could save £400m a year simply by running their IT and payroll systems more effectively!

Amanda Cavanagh, a medical negligence specialist at Ashtons Legal, says: “Is it all about more money? Imagine what other savings could be made, perhaps there could be less bureaucracy and layering of managerial staff, which would mean more efficiency and better use of resources within the NHS. It would then follow that patient care and social care would be improved which could dramatically reduce the number of medical claims for the future”.