Could a 1p NHS tax save the health service?

This article was originally published on 6th June 2018 at Jericho Online. Reproduced here with full permissions.

Photo of an ambulance with blue lights flashing.

With the National Health Service reportedly the number one priority for Conservative Party voters, ahead of Brexit and immigration, Jeremy Hunt - now the longest-serving Health Secretary in history - has again floated the idea of a ring-fenced NHS tax to raise funds for the crisis-stricken service.

Polls suggest that around 65% of the public would support paying an extra penny per pound on income tax if the money was earmarked for the NHS, and public figures such as Dame Esther Rantzen have even suggested pensioners should be allowed to give their winter fuel allowance to the health service if they feel they don’t need it.

Successfully reanimating their ‘all in it together’ slogan would be welcome positive publicity for Hunt and the Conservatives, helping counteract eight years of increasingly disastrous revelations on healthcare. The Health Secretary in particular needs a political victory to neutralise recent scandals including exploiting loopholes to avoid tax on the purchase of seven luxury flats, and potentially breaking anti-money laundering laws in failing to declare the purchase (punishable by up to two years in jail, although his apology was deemed satisfactory by parliamentary authorities).

With the 70th anniversary of the launch of the NHS coming up in July 2018, campaigns to increase funding to the service have been mobilising online, and several marches are planned for the anniversary. Almost nobody disagrees the NHS needs more funding of some description. However, is an NHS tax necessary for this, or even a valid treatment for the problems facing the health service?

NHS in steep decline

In becoming the UK’s longest-serving Health Secretary, Jeremy Hunt’s record has come under intense scrutiny. He was recently forced to abandon the target to treat 95% of A&E patients within four hours - a target already lowered in 2012 - after performance rates plummeted to record lows. Meanwhile, numbers of waiting patients have soared by over 840%, with 1.5million extra people on waiting lists since 2012 - a staggering increase of 22410%. Bed numbers have fallen by 7,000, and some cancer patients now face delays of nearly 18 months in beginning treatment, despite a target of just 62 days from GP referral.

Despite only a minimal rise in attendance, the percentage of patients spending less than four hours in major A&E units has dropped drastically, after remaining at around 96–98% from 2004–2010/11. Credit: Nuffield Trust, based on data from NHS England.

Staff are also warning that quality of care is declining - the British Medical Association recently reported that 67% of doctors believe emergency care services have worsened, with figures of 72% for mental health provision and 71% for GP services. Studies have put excess deaths since 2010 at over 120,000, with yearly increases since 2011 after nine continuous years of improvement.

Medical bodies are also drawing attention to mass shortages of staff, estimated at nearly 100,000 in total. This is equivalent to one in every twelve NHS jobs, in an organisation which is the world’s fifth-largest employer. Despite lacking 10,000 doctors and 40,000 nurses, hundreds of foreign doctors are being denied visas thanks to Theresa May’s ‘hostile immigration environment’. This policy could also hit staffing levels particularly hard after Brexit, with 65% of EU doctors uncertain about remaining in the UK and EU applications plunging.

Where has the funding gone?

Since its founding in 1948 until 2014, the NHS received an average annual increase in funding of 3.7% after inflation. After 18 years of Conservative governments under Thatcher and Major, with funding increases below average, Tony Blair countered rising waiting lists and crumbling infrastructure by aiming to increase health spending to average EU levels.

Critics counter that funding isn’t everything. Despite improved health outcomes, more staff and modernised facilities, the result of New Labour’s investment can appear underwhelming given the amount invested. Blair’s backing of internal markets in the NHS led to hospital deficits despite increased funding.

Further, the spread of Private Finance Initiatives (PFIs), initially introduced to the NHS by the Conservatives in 1992, enabled rapid investment but at higher long-term cost to the taxpayer. In a PFI, private investors are tasked with delivering public sector projects; the government then pays for these annually through ‘unitary charges’, often with significant interest rates.

However, NHS funding has plummeted since 2010, actually decreasing in real terms in 2010–11 and reaching an average of just 0.6% per year after inflation up to 2015 - the lowest five-year average since records began. When taking rising patient numbers into account, there was in fact a decrease in funding from 2010–2013.

Photo of Jeremy Hunt MP with his arms crossed in a meeting.
Health Secretary Jeremy Hunt has regularly been accused to wanting to privatise the health service, having co-authored a policy book on doing so in 2005. Photo credit: Wikipedia Commons

In 2015, the NHS was asked to make £22 billion in savings in six years, and now faces a funding gap of £30 billion by 2020. However, even these figures hide the true crisis the service finds itself in. In 2010, public sector pay was frozen for two years and then capped at 1% - NHS staff saw a 15% cut in pay after inflation, leaving many nurses relying on foodbanks and payday loans, according to the Royal College of Nursing.

Following a series of strikes and dramatic decreases in staffing levels, the Health Secretary agreed to a new three-year pay deal for health workers of 6.5–29%. Despite not necessarily meaning a pay rise, with inflation expected to be at least 6.5% over the period, this will still cost the NHS an extra £4.2 billion.

The scale of the problem is also being hidden by accounting tricks, misuse of funds, and raiding capital budgets. Examples include hospital bosses using charity funds to pay for desperately needed upgrades, and last year’s ‘redeployment’ of £1 billion from NHS capital funds, supposedly earmarked for essential modernisation and maintenance, into day-to-day spending. Nearly £4 billion has been raided from capital budgets to prop up the health service in the last four years, and the NHS ‘now faces an estimated £5 billion backlog maintenance bill’. These abandoned repairs have also led to over 17,000 incidents, including the partial collapse of at least two wards, resulting in costly cancellations and emergency spending.

The service appears to be slowly spiralling into perpetual crisis, having just faced its ‘worst winter ever’. With the uncertainty caused by Britain’s looming departure from the EU (and President Trump’s threat to make the ‘free-loading’ NHS pay billions more for medicine in any new trade deal), could a new ‘NHS tax’ be the remedy so desperately needed?

Wrong diagnosis, wrong treatment

There are fears a special NHS tax would be more ‘sticking plaster’ than long-term solution. New funding certainly sounds welcome, but without any attempt to fix the underlying issues plaguing the health service, investing more money merely addresses some of the symptoms of the problem, while doing nothing to cure it.

The first issue, which has dogged the NHS since 1990, is the creation of the ‘internal market’, where parts of the service which pay for care were split from those that provide it. This was introduced ostensibly to incentivise hospitals to improve productivity by creating competition between providers. The additional costs of this market are tough to quantify, but estimates range from £5–10 billion a year to £30 billion a year, up to a quarter of the NHS budget.

A 2010 Health Select Committee report put the figure for management costs at 14% of the annual budget, which would be unsurprising given that countries with market competition in healthcare generally spend 20–40% of their budgets on administration. Countries that have increased the use of markets in healthcare have seen administrative costs soar - in Germany’s case by 63.3% between 1992 and 2003.

In fact, competition can often lead to beggar-my-neighbour situations, with NHS organisations ‘dumping’ patients and costs onto other services to meet targets. The Centre for Health and Public Interest argues that had the billions spent creating the internal market been instead directly allocated to patient care through existing mechanisms, it would almost certainly have resulted in far better care and financial outcomes.

Photo of Richard Branson giving a double thumbs-up to the camera at a Time Magazine event.
Richard Branson, founder of Virgin Group which owns VirginCare. The private healthcare group has over 400 NHS contracts worth a total of £1billion. Photo credit: Flickr, David Shankbone

Privatisation is also siphoning vast sums of money from the NHS, despite Jeremy Hunt’s insistence that such claims are ‘pernicious myths’. Department of Health figures show funding to private companies (known as Independent Sector Providers, or ISPs) jumped from £4.1 billion in 2009–10 to £8.7 billion in 2015–16, largely thanks to the 2012 Health & Social Care Act - the ‘most extensive reorganisation’ of the structure of the NHS in history. This forced the NHS to outsource while removing the duty to provide free healthcare for everyone, and non-NHS firms are now given around 70% of tendered contracts.

ISPs of course only bid for ‘cost-effective’ contracts, slicing off profitable sections of the NHS into corporate pockets while leaving loss-making services in public hands. Corruption allegations have also mounted as clinical commissioning groups (CCGs) responsible for administering contracts have taken payments from drug companies, forged links to private healthcare and awarded contracts to ISPs even when NHS bids are cheaper. Companies are even allowed to sue the NHS - as VirginCare did after not winning a contract - while passing costs for botched operations or cancelled contracts back to the taxpayer.

Proponents of privatisation, such as thinktank Reform, say that privately-run services can be more efficient, drive improvements in care and ‘put patients at the heart of the NHS’. They argue that increased choice and competition drive down costs, as well as enabling politically-sensitive rapid investment that governments are unlikely to make.

However, research by UNISON, Britain’s second-largest trade union, and many other organisations shows privatisation does not result in better or more efficient healthcare - in fact, quite the reverse. Outsourcing has significantly damaged the quality of patient care, even on basic services such as hygiene, as companies seek to cut costs to boost profits. A report by the British Medical Association found that nationally, CCGs which spent proportionally more money on private companies received worse NHS England ratings than those which spent less.

This trend holds true worldwide. Countries with private, insurance-based systems like the US spend double what the UK does on healthcare, but have worse scores in almost all measures including efficiency, access and equity. However, the Health & Social Care Act raised the amount of private work NHS trusts were allowed to carry out from 2% to 49%, meaning cash-strapped hospitals now rely on treating private patients to raise funds, forcing out state patients. Doctors warn this change is putting lives at risk for those who can’t afford to pay for private treatment.

A birthday to be proud of

These major underlying issues with the NHS are unlikely to be solved by pensioners giving up their winter fuel allowances, or a new NHS tax. Retaining an efficient and fair health service, free at the point of use, will require underfunding of the NHS to end - but this could be better realised in a variety of ways, from ending the creation of tax loopholes and sweetheart tax deals for large corporations, to returning profitable industries to national ownership.

However, the evidence suggests that without tackling the current drive for marketisation and privatisation, additional financial support for the NHS will only go so far. With Jeremy Hunt preparing another push for privatisation, his planned tax-based ‘birthday present’ for the NHS will do little more than add insult to injury for the struggling service.

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Sam Peters

Architect by training, critical care researcher by trade, and activist by nature. Mainly write on environmental/social/political issues from a green/left angle.