NHS could ‘swallow up’ all the money raised by new tax rise, says IFS

The NHS could “swallow up” all the extra £12bn a year the controversial hike in national insurance will raise, leaving no money to improve social care, Boris Johnson has been warned.

The Institute for Fiscal Studies’ prediction comes amid warnings from NHS leaders that the government’s planned boost to the service’s budget “falls far short of what is needed”.

History shows that the NHS in England almost always ends up receiving more money than ministers have estimated, and that is likely to happen again with the spending spree on health and social care for the next three years the prime minister announced on Tuesday, the thinktank said.

Johnson told MPs on Tuesday that while the NHS would get the lion’s share of the £12bn a year between 2022-23 and 2024-25, with social care receiving just £1.8bn, social care would receive much more from April 2025 to help improve the quality of and access to help older and disabled people and some children need.

The IFS’s analysis of where the money generated by the 1.25% rise in NI will go concludes that “an ever-growing NHS budget could swallow up all of this week’s tax rise, leaving little for social care”. Working people will start paying the extra tax, which the government has called the “health and social care levy”, from next April. The hypothecated tax would raise £12bn a year, Johnson said.

The analysis, by Ben Zaranko, a research economist at the IFS, said: “The experience of the past 40 years shows that NHS spending plans are almost always topped up. If history repeats itself, the ‘temporary’ increases in NHS funding announced this week could end up permanently swallowing up the money raised by the tax rise.”

Looking at the years between 1982 and 2020 “on only two occasions over that period of almost 40 years has health spending grown by less than was originally planned; it almost always grows by more. This isn’t because the NHS is always overspending its final budget – it’s because the NHS budget is frequently topped up,” the analysis added.

Health spending was planned to rise by an average of 2.7% a year between 1982 and the start of the pandemic. However, it actually received a lot more – an average increase of 4.1% – the IFS says.

“History suggests these [new spending] plans will be topped up further – they have been in almost every year for the last 40 years. That could leave little if any of the tax rises announced yesterday available for social care,” Zaranko added.

His analysis also points out that, even if NHS spending is not topped up beyond the sums already set out for the next three years, the proportion of government spending on public services that health will consume will hit 44% by 2024-25, up from 42% in 2019-20, which was itself a significant increase on the 32% in 2009-10 and 27% in 1999-2000.

However, Zaranko also highlighted that despite Johnson trumpeting record investment in the NHS to tackle its huge backlog of care, the service’s average budget rise over the next three years will be 3.9% – the same rate of growth that then prime minister Theresa May anticipated when she unveiled a five-year funding deal for the NHS in 2018, just before its 70th birthday.

Johnson has simply extended by a year the period in which the NHS budget will rise by that amount and not increased it, Zaranko pointed out.

NHS Providers and the NHS Confederation, which represent the 213 NHS trusts in England, warned that the extra health funding would leave the service facing “impossible choices” over whether to tackle long waiting lists or respond to the growing demand for care.

“NHS leaders have unfortunately become accustomed to having less money than the service needs. But the size of the funding gap remains daunting and will significantly impact the kind of care that the NHS can provide to the public in the months and years ahead,” Saffron Cordery, NHS Providers’ deputy chief executive, and Matthew Taylor, the confederation’s chief executive, said in a joint statement.




, ,

Comments are closed.