As her political travails continue, British prime minister Theresa May has her party hat on. It’s the National Health Service’s 70th birthday in July, and the PM recently announced plans to increase the NHS budget by £20 billion a year in real terms over five years. May has said that funding for the project will come from the “Brexit dividend,” though she has also made coy references to tax hikes.
It didn’t take long for party poopers to declare this an insufficient explanation as to where the extra NHS funding is going to come from. Some have inquired whether May has a secret money tree; others, a money forest. They have a point, but some clarifications are in order.
So far, the Brexit-vote doomsayers have been disappointed. The U.K. Treasury predicted an economic earthquake, but the country is currently enjoying both an employment boom and economic growth. There is no reason to suppose that the most recent forecasts from the Office for Budget Responsibility and the Institute for Fiscal Studies, which maintain that Brexit will lose the U.K. billions, are any more reliable.
Nevertheless, May’s spin on the £20 billion pledge was economically fallacious, and politically unwise. No matter Brexit’s effect on economic growth, the U.K. will continue to pay the usual amount into the E.U. budget until December 2020. Then, of course, there will be a hefty divorce payment. In real terms, there is no “Brexit dividend” around the corner.
Since May must know this, one wonders why she chose to pretend otherwise, and, more important, how she actually plans to fund her NHS plan. The money May needs will require her to raise taxes, borrow more, make welfare cuts, or do some combination of all three. Politically, this is problematic to say the least.
The Conservative party’s 2017 manifesto listed its fiscal priorities as “a strong economy built on sound public finances” and “low taxes,” but it also committed itself to the founding principles of the NHS. Specifically, it promised, “First, that the service should meet the needs of everyone, no matter who they are or where they live. Second, that care should be based on clinical need, not the ability to pay. Third, that care should be free at the point of use.”
The money May needs will require her to raise taxes, borrow more, make welfare cuts, or do some combination of all three. Politically, this is problematic to say the least.
Since 90 percent of the British population also believes in these principles, to refuse to bail out the NHS in the name of fiscal discipline would effectively be political suicide, especially when Jeremy Corbyn’s Labour party sits in the wings, promising voters the moon. But the humble funding increase May is proposing won’t be enough. Jeremy Hunt, May’s health secretary, and Simon Stevens, the chief executive of NHS England, did their best to get the 4 percent annual increases that are needed to keep the NHS afloat. In the end they were promised average increases of 3.4 percent per year.
No doubt, the structure and history of the NHS’s finances are complicated. The NHS is funded primarily through general taxes (80 percent) and National Insurance (18.8 percent). The remaining 1.2 percent of funding is from patient charges, which were introduced in the early 1950s. But the average funding increase from the government since then has been 3.7 percent. This dropped significantly during the great (Conservative-led) coalition squeeze of 2010.
Then Andrew Lansley’s 2012 Health and Social Care Act — the most radical top-down reorganization of the NHS since its conception — brought about new pressures via decentralization. Externally, meanwhile, the population is increasing, living longer, and, on account of newly available treatments, being admitted to hospital more, which has created an ever-growing gap between funding supply and demand. As a result, legitimate concerns are mounting over patient care.
Historically, the Conservative party has favored cuts to social care, which are more palatable to its supporters than tax hikes. But spending on adult social-care services by local authorities underwent a cut of 8 percent between 2009–10 and 2015–16. It’s hard to see how welfare funding could be reduced any further, and if the Tories even tried, they’d only be playing into Corbyn’s hands.
So how is May’s search for NHS money going? In the latest development, a number of Conservative MPs reportedly went to the Treasury to deliver one-minute pitches in what Spectator political correspondent Katy Balls described as a disappointing “game of policy X Factor.”
Behind all the music and clamor, the NHS “birthday present” looks increasingly like a ticking time bomb, wrapped up and tied off with a bow.