A hypothecated tax for the NHS and adult social care?

The way successive governments have implemented tax and spend policies to maintain public services has often driven some of the established historical political fault lines in British politics. These ideological tensions often get in the way of what is really at stake. The public want to access good quality public services, particularly health and care provision, that is able to meet demand as the population continues to age.

Delivering a sustainable long-term funding solution for health and adult social care has consistently been in the news recently and there are growing calls to shake up tax policy to fund provision. It is important to look behind the headlines and look closely at what a new tax model to fund health and care services could yield.

There is some evidence that suggests that the public are open to the idea of a dedicated tax for health and care. Back in September 2017, we conducted a UK-wide poll in partnership with Ipsos MORI, to gauge public opinion on their views about adult social care, planning for later life and managing future care needs. We found that half or more of people surveyed supported income tax rises across the basic, higher and additional rate in order to increase the amount of funding available for adult social care. The majority of people surveyed also said that people should be required to plan ahead – 67% agreed that people should be required to plan and prepare financially for later life.

It is widely accepted that there needs to be more transparency around public spending, but does the answer to health and adult social care funding problems lie with a hypothecated tax?

Let’s play devil’s advocate for moment and look at the arguments for and against a hypothecated tax.

The common argument put forward against a ring-fenced tax is that committing public spending to uncertain revenue could increase the likelihood of volatility across health and adult social spending. In good times when tax receipts are high services could be flooded with cash, but there is always the risk of a recession which could affect the amount of funding going into health and care.

On the other hand, those who support a hypothecated tax say that reducing government flexibility and power improves accountability over public spending decisions. They say it balances out the power ratio between the state and public in terms of delivering greater transparency.

As you can see, there are differing views about the effectiveness of a hypothecated tax approach. Moving away from these arguments we are seeing the same well-trodden argument about funding and how it will resolve long-term sustainability across health and care provision. Whilst the level of taxation and government funding for services is a critical element of the debate, there needs to be a broader look at what else needs to change.

The first and most obvious issue is to get both health and social care systems working hand in hand – which is something they currently need to improve. This is because the real system pinch point lies between transferring people out of hospital and back into a community setting or their own home once they are fit and well to do so. To make this happen, NHS Trusts and Local Authorities need to improve communication, processes and target resources at a community level to reduce the backlog.

Another priority is the ‘careforce’. Our UK-wide survey pointed out support for carers, more than three-quarters of the public regard a focus on the ‘careforce’ as one of the most effective ways to reduce future pressure on the social care system, increasing the number of health and social care workers and providing greater support for unpaid carers.

Ultimately, we need to determine the parameters of a new settlement for health and care that provides the right services for everyone, while recognising the benefits of living longer. We need a new National Care Plan. It could offer greater security for the public and underpin the institutional and cultural shift that will enable change for the better.

No matter what tax policy is put in place, the fundamental challenges presented by people living longer and developing more complex conditions in later life will not be solved through fiscal policy adjustments alone. The debate about how best to respond, adapt local and national policy, target funding and unify health and care provision will continue over the months and years ahead. The ground does seem to be shifting as politicians and civil servants wake up to the pressing need to change and consider new options to plan for the future of health and care provision.

The time for talking about change is over. We need action now to ensure everyone in our society can continue to lead a healthy and independent life in old age.