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Jeremy Hunt knows more about NHS than most civil servants will ever forget.  He is the longest-serving Health Secretary since Social Security was hived off the department he now heads.  He reversed the hands-off stance of his predecessor, Andrew Lansley, and has been a hands-on Secretary of State – creating “a programme of Ofsted-Style ratings and special measures into the NHS”, and intervening from the centre to help turn hospitals round.  He has avoided an NHS winter crisis repeatedly leading the TV news, and thus creating a sense of destabilisation for the Government.  He saw public satisfaction with the service rise on his watch.

A combination of his experience and the loss of Theresa May’s majority has left him in an authoritative position – strong enough to refuse to move from the Department.  When he speaks on his subject, Downing Street has to listen.  And he is increasingly speaking his mind, the sum of which is that the service needs a ten year commitment to higher spending.  He backs a ringfenced tax to fund it.  Others are pushing at the same door.  Nick Boles wants to call such a tax National Health Insurance.  Nick Macpherson, the former Permanent Secretary at the Treasury is on board.  David Willetts wants new property and inheritance tax measures.  They will all remember Gordon Brown’s 2002 increase in National Insurance Contributions to help fund the NHS – a gambit which, in political terms, paid off.

Hunt has a point.  The costs of the service, driven by the needs of an ageing population, rise ahead of spending.  Social care needs fixing, local authorities are restive and the Tory manifesto plan fell apart.  Those public satisfaction ratings dropped last year.  Furthermore, it’s not just the usual suspects pressing for higher spending; Boris Johnson and Jacob Rees-Mogg want some of that fabled £350 million stumped up.  This site recognises that taxation will always be necessary to help pay for public services – one would leave the real world behind to suggest otherwise – and that some taxes must rise from time to time.  That’s why we recently ran a series on what Tories should tax – arguing that there may be a trade-off between higher council tax bands and lower taxes on incomes.

However, the Health Secretary is not alone.  Gavin Williamson wants more money for the defence budget: the Government now believes Russia to be the main security threat.  Mark Wallace wrote recently on ConservativeHome about the chain reaction, across much of the public sector, to the partial lifting of the pay cap for NHS staff.  Local authorities want the Treasury to cut them more slack now that the pressure on borrowing is easing.  So does nearly everyone else.  School funding may not have made the same national splash during the election as social care, but Tory MPs and candidates felt the heat from parents over a slowdown in the rate of increase.  Like sorrows, spending pressures come not single spies, but in battalions.

As we say, some taxes must rise at some times.  But a combination of good news on the deficit, exhaustion with George Osborne’s “long-term economic plan”, the exigencies of Brexit and fear of Jeremy Corbyn are taking the Conservative Party into strange country.  Britain cannot simply tax itself to prosperity.  If some taxes must rise, others must fall – and the general direction should be down: the tax burden is already set to rise to its highest level in 40 years.  And unless one is a sunny side up supply sider, convinced that one can just cut taxes and let borrowing soar, it follows that the Government will have no option but to turn to the other side of the fiscal coin: public spending control.

With next year’s spending review already looming into view, Philip Hammond kept his options open in his Spring Statement – or, as he put it, opted for “a balanced approach”.  Improvements in the public finances will fund paying off debt and higher public spending and some tax cuts.  It would have been odd had he said otherwise.  What will be crucial will be the mix.  The problem is obvious: how is spending to be scaled back when demands for more of it are soaring?  Thoughtful Ministers ponder another grand bargain – this time over health, with those further spending increases coming only on condition of further service reform, with NHS staff free to innovate more, faster hospital throughputs, and housing villages with quality care for ageing people.

But it will take more than incremental reform to get and keep the books balanced.  Nor could ending overseas aid provide funds on the scale required, since it consumes £13 billion out of the best part of a £800 billion total.  Roughly a third public spending is committed to health and pensions but, after the social care imbroglio, the Government will be very cautious indeed about “grey welfare”.  One senior Minister believes that the path to progress lies through a zero-based spending review.  Not what usually passes for one, but a real root-and-branch exercise which probes each service and asks whether the state must supply it.

That sounds a very long way from Theresa May’s pre-election stress on “the good that government can do”, and rather more like what is some ways a reaction to it – FREER, which Rebecca Coulson wrote about this site last week, and which stresses a small state, lower taxes and individual freedom.  But it ain’t necessarily so.  Between the individual and the state lies civil society: that network of families, clubs, charities and voluntary groups that is a Tory article of faith.  David Cameron’s Big Society was a particular imagining of it.  A Canada-type zero-based review was part of its founding content.  We shall be returning to the matter this week.

160 comments for: We cannot tax our way to prosperity – or better public services

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