UK faces two decades of tax hikes to pay for NHS
UK taxpayers could face another two decades of tax hikes in order to fund the government's promised annual £20bn boost in NHS spending.
According to a study by the Institute of Fiscal Studies, the recent announcement regarding the NHS alongside the government's ongoing pledge to eliminate deficit by mid 2020’s, means the spending boost will either come from reductions in spending elsewhere or significant tax rises.
The burden is likely to fall on taxes since there has been a large scale of recent cuts to other areas says the IFS.
In the last eight years, while spending on the NHS has grown slowly, growth in the share of service spending going on health has continued at a record pace thanks to significant cuts to other departmental spending.
The recent announcement from the government implies an average annual increase in funding for the health system of 3.4% over a five year period. Although the exact impact on the wider Department of Health budget is still uncertain, with no details yet available for how spending on capital, much of public health and staff training will change over the same period.
The alternative to continued cuts in other public spending is to raise taxes, the IFS said. While the share of national income raised in tax is high by UK historical standards, it is still low by European standards.
Tax rises are rarely popular even though the share of national income raised in tax is still low by European standards, but there is growing evidence of public willingness to fund the NHS, the IFS said.
However, there is no clear consensus on which taxes should be raised, by how much, or who should pay the additional taxes.
Paul Johnson, a director at the IFS, said that as years go by, the country spends more on health and over a long period it has been funded without the need to raise taxes as a fraction of national income since a smaller share of national income was being spent in other areas: “That no longer looks possible, leaving higher taxes the most likely option”.