Securing Funds for the Proposed NHS Multi-year Funding: The Feasibility of Using a Hypothecated Tax

This new publication sets out the arguments in favour and against the introduction of a hypothecated tax to fund the UK National Health Service (NHS).

In June 2018 the UK Government announced an increase of 3.4% per annum in spending on the NHS in England for each of three years. It indicated that taxes will rise to pay for this. Debate has increased as to whether a separate (hypothecated) tax should be introduced to fund the NHS. The Kings Fund has published this year on the topic. OHE published an academic review sometime ago.

This OHE publication by Nick Timmins, a senior fellow at the Institute for Government and the Kings Fund, sets out arguments in favour and against. It is based on the seminar he gave at OHE in July 2018. The issues he explores include:

• The argument that hypothecation will bring greater stability, transparency and public support;
• Which tax(es) might be suitable?
• Possible distortions in public expenditure that might result;
• Dealing with shortfalls and surpluses;
• UK experiences of revenue hypothecation in the past, distinguishing soft (non-binding) approaches such as Vehicle Excise Duty, and hard (binding) pots such as National Insurance, neither of which have held.

He concludes by quoting a John Appleby blog which argues that the key decision is to agree (or not) to spend more money on the NHS. Creating a new tax is a distraction from this.

I would point out that Layard in an earlier BMJ Soundcloud debate with Appleby makes the point that the existence of the hypothecated tax will change the nature of the political debate about NHS funding. Of course, even if one accepts that argument, the practical issues Nick Timmins raises still have to be addressed.

Nick Timmins OHE Seminar Briefing is available here.

Citation

Timmins, N. (2018) Securing Funds for the Proposed NHS Multi-year Funding: The Feasibility of Using a Hypothecated Tax. London: Office of Health Economics. 

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