An 'NHS tax' is perfect for a 'new centrist party'—stale, regressive and technocratic

National Insurance is regressive. Hypothecating taxes tends to encourage ideas of opt outs & top ups. So why is Liz Kendall promoting these as the 'new consensus' for NHS funding?

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Caroline Molloy
24 April 2018
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Image: Liz Kendall in 2015. Lauren Hurley/PA Images, all rights reserved.

Today, Tory MP Nick Boles, Lib Dem former health minister Norman Lamb and former Blairite health minister Liz Kendall joined forces to promote the idea of a dedicated ‘health and social care tax’, through National Insurance, to replace current NHS funding. Boles grandly proclaimed it “A new Beveridge moment”.

The main lesson to be drawn from their interview broadcast on this morning’s BBC Radio Four Today programme, is that it doesn’t take much to excite the media about anything that could be portrayed as - if not the birth pangs, perhaps at least the twinkle in an eye - of a ‘new centrist party’ run by ‘grown-ups’. A rehash of an old, bad idea that’s been doing the rounds in right-wing circles for years? That will do just fine.

The interview – conducted by the BBC’s political editor Laura Kuenssberg not its health editor Hugh Pym – was notable for its lack of interest in whether such a plan actually had anything useful to offer today’s NHS. Kuenssberg’s line of questioning focused exclusively on the politics: “I mean here we are, an extraordinary degree of consensus…You’re all saying that the parties have to share the political risk… that none of the party leaderships right now are up to this task…”.

The stale idea of an ‘NHS tax’ is perfect for those who’ve pinned their hopes on the creation of a ‘new centrist party’. It’s a technocratic issue that’s unlikely to be well understood by most voters, many of whom are under the mistaken impression that National Insurance is what funds the NHS already. The history is slightly complicated, but the health service is still overwhelmingly funded as Nye Bevan set out when he explicitly rejected the 1911 National Insurance-based system of healthcare as unfair and "peculiarly unsuitable" and instead set up the NHS:

“The means of collecting the revenues for the health service are already in the possession of most modern states, and that is the normal system of taxation. This was the course which commended itself to me and it is the basis of the finance of the British Health Service. Its revenues are provided by the Exchequer in the same way as other forms of public expenditure. I am afraid this is not yet fully understood. Many people still think they pay for the National Health Service by way of their contribution to the National Insurance Scheme.”

The system Bevan founded continues to enjoy sky-high public support, with nine out of 10 saying its founding principles should still apply today. But being “unencumbered by nostalgia for the 1945 welfare-state settlement” is, as Jeremy Gilbert rightly says, central to the identity of the Blairites and their fellow neoliberal-friendly “centrists” in other parties.

Why ‘comprehensive’ healthcare matters

The ‘NHS tax’ idea is also the antithesis of what campaigning politics is about – focusing, as it does, on inputs rather than outcomes.

The public want an NHS that provides the healthcare they need, when they need it – in other words, a comprehensive and timely service. And to the dismay of right-wingers, the public has remained firmly wedded to this outcome that was at the heart of the founding of the NHS. To the idea that it's the state’s duty to provide a comprehensive healthcare service for everyone (though that duty was significantly weakened - some say abolished - by the 2012 Health and Social Care Act).

The new set of NHS ‘principles’ that Kendall and Boles have produced say nothing about protecting and renewing a ‘comprehensive’ NHS. They will do therefore do nothing to stop people being told – as they are now, increasingly - “not on the NHS” for treatments ranging from erectile dysfunction and vasectomies, to hip and knee ops, timely cataract removals and hearing aids. Some – like former British Medical Association Deputy Chair Kailash Chand - have already warned that if this trend continues, the NHS is likely to shrink to just an inadequate Medicare style fall-back option for those who can’t afford health insurance. All of the many recent attempts to impose a neoliberal-friendly ‘cross party consensus’ have failed to incorporate any principled red line about a commitment to comprehensive healthcare – and so all of them have been resoundingly rejected by NHS campaigners (as Norman Lamb should know – he’s been involved in most of the recent attempts).

The ‘NHS tax’ idea seems unlikely to appeal to any particular demographic of voters. But of course, it could well appeal to a group that most of the ‘centrist party’ fans seem to consider far more important – potential funders. If you look closely at what’s said – and unsaid - in the Boles/Kendall principles, there’s a lot of music to the ears of corporations and the rich.

The dangers of an “NHS tax”

The most obvious problem in using National Insurance to pay for the NHS is that it is a deeply regressive tax that is capped for the rich. Boles and Kendall nod to this problem, but say only rather vaguely that “higher earners, the self employed, and better off pensioners” will make a “fair” contribution. But if this government is offered a choice between meaningfully reforming a huge loophole that lets them tax poor people more heavily than rich ones – or just loading massive new costs onto an unreformed tax that doesn’t upset the Daily Mail, in the name of ‘saving the NHS’ and ‘a new consensus’ – which do you think Theresa May might pick?

Funding through the NHS through the National Insurance system is not just regressive, though. There are other dangers.

Firstly, such a plan would probably make it easier – not more difficult – to underfund the NHS, with yet still more quangos and regulators deflecting public concern away from politicians. It would renew the emphasis on the (false) idea that public funds are a simple matter of 'tax in, spending out', and also the equally false idea that the NHS is somehow separate from the real business of government (a point Caroline Lucas makes excellently in the Guardian today). And whilst Boles and Kendall say the new Fund ought to be “publicly owned”, it’s not hard to imagine the Fund being privatised in the future (right wing Labour MP Frank Field has already called for just such an NI based NHS fund to be run as a ‘mutual’ …)

Secondly, separating out our payments for the NHS and channelling them through the contributions-based National Insurance system would make it far easier in future to exclude people who – for whatever reason - haven’t earned enough to pay sufficient contributions.

Liz Kendall told me in January “I do not support…social insurance”. But the scheme Boles has persuaded her to sign up to looks an awful lot like social insurance in many respects. Admittedly, it does commit to ‘universal’ provision (rather than contributions-based provision) – but how long would such a commitment last, when the mechanism made it so easy to exclude people who could be labelled as ‘less deserving’? (Indeed, we ought to be careful when we’re making the case for the Windrush generation to receive healthcare, that we don’t over-emphasise the fact that they’ve ‘worked and paid taxes’, but rather focus on defending the right to universal, comprehensive healthcare as one of Britain’s highest achievements).

Another danger of an ‘NHS tax’ is that such a scheme would also be likely to create pressure to grant an ‘opt out’ for those who pay for private health insurance – much like the NI reforms Thatcher introduced in 1988 which allowed those who signed up to private pensions to opt out of the State Second Pension (with disastrous results). Once an opt-out is allowed, we’re into two-tier healthcare and delivering the insurance firms’ dream.

And what of the contributory benefits we currently have? Boles suggests that the entire National Insurance fund be renamed the ‘National Health and Care Fund’. If our healthcare, sick pay and state pensions are all supposedly coming from the same pot, could we in future see them paid out as a merged allowance, from which people can buy their own healthcare from a range of ‘providers’, alongside their fuel bills and weekly shop, topping up from their own money when their 'entitlement' payment runs out? This might sound like a distant Thatcherite dystopia, but it’s a set of ideas some on the right – including the Labour right – have flirted with. Then Chancellor George Osborne floated the possibility of ‘integrated budgets across health and employment' back in 2014, not long after New Labour think tank DEMOS had laid the groundwork by suggesting that benefit and healthcare 'entitlements' could be merged on one ‘entitlement card’. Already the use of fixed ‘entitlement’ sums (known as ‘personal budgets’) is entrenched in social care – and the concept is now being rolled out with little fanfare into healthcare, enthusiastically promoted by another Blairite former Health minister Alan Milburn, and by Liz Kendall herself.

Jeremy Hunt has written to all Tory MPs asking for their ideas for the future of the NHS, and both he and Theresa May have said that they’ll launch a new “long term plan” for the NHS this summer – probably timed to coincide with its 70th birthday. The “centrists” have a truly lousy birthday present up their sleeve. It’s up to the rest of us to keep a close eye on them.

Because – as Bevan said, and as we’ve been reminded of in recent weeks:

“Society becomes more wholesome, more serene, and spiritually healthier, if it knows that its citizens have at the back of their consciousness the knowledge that not only themselves, but all their fellows, have access, when ill, to the best that medical skill can provide.”

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