The chancellor is stuck between a rock and a hard place – he needs creative solutions
It is hard not to feel some sympathy for Philip Hammond.
In preparing the Autumn Statement it must have become apparent to him that he has been handed the political equivalent of a hospital pass; the decision to leave the UK will likely prove damaging for the UK economy with lowered growth expectations and borrowing increasing to unprecedented levels.
He is also tied by the rash promise made by the Conservatives in the heady days of April 2015 not to raise tax, VAT or National Insurance if they to won the election. While this gambit proved effective in the last election — perhaps too effective as they had to put into action any number of overambitious promises — it has placed a awful amount of pressure on the UK’s finances.
Yet at the same time public services, and the NHS and social care in particular, are at the brink. It was surprising that Hammond did not heed the cross-party calls for additional funding for health and social care given that delayed discharge figures are at a record high, waiting times are increasing and doctors are warning of a perpetual winter crisis.
Considering the potential for hard Brexit looming and the promise to not to raise taxes, it is hard to see how Hammond can maneuver out from this rock and a hard place.
One way in which he might be able to keep the health and social care system from the brink, and yet say he is keeping the taxation pledge, is to introduce a hypothecated [ear-marked] tax for the NHS and social care system. It may be the only way out of the bind Hammond finds himself going forward.
The idea of a hypothecated tax certainly has merits; the Treasury has estimated a 1p rise in income tax could have raised £3.9bn this year, rising to £4.5 next year and £4.6bn in 2018-19. This would be a significant contribution to the health and social care budget. It is worth bearing in mind that the publicly funded social care system faces the prospect of a £1.9bn funding gap next year.
So the money raised from the tax could plug this gap and have over half left, which could then be spent on the NHS.
Too often when a ring-fenced tax is proposed it is framed only in terms of an NHS tax, but what we need is a tax that is dedicated towards the NHS and social care. The problem can be neatly summed up, the NHS is extremely important, but so too is the social care system. The public are passionate about protecting the NHS, but don’t generally appreciate the benefits of the social care system in looking after vulnerable people and keeping them out of hospital in the first place.
As a result it may be popular to demand ‘more funding for the NHS’, but it risks ignoring the equally important social care system.
Although Conservatives may not like it, this proposal may at least offer Hammond a way to raise cash while sticking to the party’s pledge not to raise taxes. It may require a little political weaving and ducking to sell it, but weaving and ducking is, after all, what politicians are good at.
William Kløverød Griffiths is Health policy officer for the think tank ResPublica
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