The government’s announcement of 3.4% a year real terms NHS spending increases is remarkable for several reasons.
First, it was simply a commitment to spend more money, rather than to deliver particular outcomes. Second, it was announced before decisions had been made about how to pay for the extra spending. Third, it effectively pre-empts the spending review which will determine what will be spent on other programmes into the 2020s.
Subsequently, the defence secretary was widely quoted as saying he would bring down the government unless he got an additional £20bn for the armed forces. The defence select committee has this week backed up the case for more MoD cash.
Populist cash-grabs by senior ministers come against a backdrop of weak economic growth. The Treasury are left attempting to fund a significant rise in public expenditure without any parallel commitment to raise taxes.
If the UK is to fund a big rise in NHS and defence expenditure while sustaining the triple-lock on pensions and retaining the deficit target, taxes will indeed have to rise. Moreover, it will not be possible to collect substantial extra revenue only from ‘the rich’. If the State is to grow, there should be a broader increase in direct taxation.
The rationale for a rise in, say, income tax is that it is important people understand the costs of paying for public services. The government has pushed up council tax to fund adult social care. But it will doubtless flinch before increasing income tax to pay for the ever-popular NHS.
Separately, the forthcoming spending review will have to meet demands from a number of services which, unlike health and defence, have been starved of resources since 2010. NHS spending will have increased by at least £50bn from 2009-10 to 2019-20 – more than English local government’s entire annual ‘spending power’. Put simply, health needs to raise spending by the equivalent of all local government revenue spending every decade just to stand still.
This way of doing things cannot be sustained. However loved the NHS is, on current trends it will eventually consume 100% of public expenditure. Not even the fabled ‘Brexit dividend’ will disguise this baleful reality.
Tony Travers, director, LSE London