It isn’t complicated, really. The Health and Social Care levy is staying, so the National Insurance increase will go ahead, but the thresholds for National Insurance will also go up, making them level with the thresholds for income tax, which is going to be cut in 2024 – if conditions allow. Hurrah!
Conservative MPs cheered, but they were like children on the mini-downslope of a rollercoaster that’s still heading straight up into the clouds. Taxes are climbing over the course of this Parliament, however Rishi Sunak spun it, still driven by a ratchet called “ageing” and “our NHS”.
Indeed, the tax cuts he announced on Wednesday only reversed about a third of the tax increases announced last year, and shuffled the burden further onto graduates and working people.
In sum, the net effect of Mr Sunak’s time in office so far is that the young, working population will hand over more and more of their income in order to pick up the tab for the ill and the elderly.
The pandemic was always going to generate a large deficit and a health backlog to service: more than a fifth of the population (perhaps even a third, by some estimates) will be waiting for hospital appointments by the time of the next election. But this isn’t a one-off. It’s an ongoing burden.
Mr Sunak has in effect admitted as much. The Health and Social Care levy introduced last year – really just a new name for a regular old rise in National Insurance contributions – is here to stay because the political imperatives underpinning it remain unchanged.
The levy’s proceeds are supposedly “ring-fenced” for health spending (a rhetorical device that is meaningless in fiscal terms) and, in Mr Sunak’s words, show the Tories’ “total commitment” to being “a government for the NHS”. I suppose this shouldn’t be surprising, given that the Government effectively spent the entire pandemic telling us that we must be prepared to die to “protect our NHS”.
Still, Mr Sunak also seems to believe that he has done something frightfully clever with his levy, which is to tie NHS spending to tax rises. Whenever a future government wants to spend more on health, they will have to bear the political pain of raising the levy, he implied in his speech. “If [the levy] goes, then so does the funding,” he said.
But as this formulation implies, the pressure in fact goes the other way. What the levy actually does is cast the halo of NHS beautification over the ills of tax rises, so that taxes are not debated as necessary or unnecessary evils, but as worthy contributors to the irreproachable cause of chucking money down the NHS drain.
In reality, all of this is less about health than about the Conservative Party’s electoral prospects. The Tories have been mouthing platitudes about the NHS for more than a decade because they believe that if they don’t, they will lose power.
Unfortunately for them, no matter how much money they throw at it, the health service will never help them to win power. The Conservatives will never be “the party of the NHS”. All they can hope for, really, is to neutralise the fear that they are its destroyers.
This leaves them in a bind, because with fewer and fewer workers now expected to pay for more and more healthcare for the sick and the elderly, healthcare productivity improvements are the only way to keep the whole thing afloat. Yet it’s unlikely the health service can innovate to the degree required without some quite significant reforms, which are politically toxic under a Conservative government.
So instead we get preposterous statements, like Mr Sunak’s claim that the Health Secretary “will ensure every pound of taxpayers’ money is well spent”. This is just verbiage, as the Chancellor knows. Indeed, in the short term, rising inflation may result in even less of the money from the Health and Social Care levy being spent on improvements for patients, if pressure builds to increase healthcare workers’ wages further.
Mr Sunak may be powerless to reduce public spending, but perhaps he should spend his credibility more frugally. One day, he might need it.
