Can we tax our way out of the health and social care crisis?

Taxes have always had a severe image problem. This is understandable: who really wants to be forced to give a lump of their money to a distant Government, based only on the vague insistence that it is for the benefit of all?

On the other hand, certain inescapable arguments for the value of taxation persist. They are based on the recognition that collective action has a value, and on the necessity of a generational contract of some sort to address the inescapable fact that some of us need more support than others.

As such, the value of taxation is often most visible when it funds the last bastions of public service; like the NHS. Because the NHS is such a cherished British institution, and because health and social care services will be depended upon by everyone at some stage of their life, many are willing to pay more to protect the NHS. Indeed, ComRes in 2014 found that the public's willingness to pay extra tax to help the NHS had reached its highest level in over a decade.

Despite the large amount of public goodwill, the economics and demographics deliver a stark verdict for the future of health and social care provision: the costs of catering for an increasingly longer-living population are simply not matched by a corresponding growth in GDP. Partly as a result of these trends, hospitals are incurring alarming deficits and missing key waiting time targets. Simultaneously, the NHS crisis is matched by an intensifying social care crisis faced by an increasingly elderly population – rendering a better integration of health and social care even more urgent. Where we need a sleek and effective solution to extract ourselves from the health and social care crisis, there has long been a vacuum.

Tax has, of course, traditionally been a sensitive topic, especially for the Conservatives, and indeed the third factor to consider, alongside an ageing demographic and a lagging GDP, is the current Government’s deficit reduction commitments. It thus comes as no surprise that the Government has dismissed Liberal Democrat peer Lord Taverne’s suggestion to convert National Insurance into a dedicated health and social care tax.

Taverne argues that Norman Lamb’s previous proposal of a cross-party, independent commission on the future of health and social care, while laudable, does not quite address the immediacy of the crisis. But according to Taverne, changing National Insurance contributions into a separate, progressive, ring-fenced health and social care tax would offer a solution – because it would be a guaranteed source of funding for the NHS, carrying broad public support.

When a Treasury spokesman ruled out Lord Taverne’s suggestion, he cited ministers who are opposed to ring-fencing taxes, which would give the Treasury less flexibility in how it spends its revenue. This will be disappointing news to those who believe that there are plenty of taxes, including council tax, whose structure and efficiency is due for an urgent reassessment. Any Government, of course, recoils from the administrative effort involved in changing tax frameworks – and the very fact that changing taxes only draws attention to them, which is not exactly electorally appealing.

Thus tax continues to carry much political baggage; but recent work like the Fabian Society publication “Tax For Our Times” and tax justice campaigner Richard Murphy’s book “The Joy of Tax” suggests that there is significant scope for opposition parties like Labour and the Liberal Democrats to propose innovations in the tax arena. If the health and social care crisis won’t be solved through any one measure, a tax reform that reorganises funding streams to reflect the changing make-up of British society may nonetheless be the first step.