Inside Westminster: An ‘NHS tax’ - everybody’s thinking about it, everybody knows it’s inevitable, but nobody will admit as much

What better way for Tories to spike Labour’s guns than by safeguarding the future of our universal system?

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The Independent Online

It is an open secret in Whitehall, yet the politicians don’t want to talk about it: the National Health Service is going to run out of money after next year’s general election. “Everyone knows there is a huge crisis coming, and that taxes will have to go up to bail it out,” says one senior civil servant.

It is left to respected think-tanks like the King’s Fund to tell the truth. This month it warned that the NHS is heading for a “major crisis”, saying the 2015-16 financial year could be a “cliff edge” as some providers cut emergency and other elective work to divert £1.8bn of NHS money to the Better Care Fund, which promotes joined-up health and social care. Fully integrated care is the only way to keep the rapidly rising number of elderly people out of hospital, but the experts think the money is simply not there to make it happen. There are real fears of a £30bn-a-year “black hole” by 2020.

Tentatively, both Labour and the Conservatives prepare the ground for a possible post-election tax rise by emphasising their drives to squeeze better value for money out of the £100bn-a-year health budget. But they shy away from the inconvenient truth: efficiency savings will not rescue the ailing NHS. It needs cash.

A few brave souls dare to put their head above the parapet. Frank Field, Labour’s former Welfare Reform Minister; Nick Pearce, director of the IPPR think-tank; Patrick Diamond, a former Downing Street policy adviser – all have urged Labour to bite the bullet.

The idea of an “NHS tax” – perhaps a 1 per cent rise in national insurance contributions to raise £4bn – is being considered during Labour’s long-awaited policy review. But it seems that Ed Miliband is not yet convinced; an across-the-board tax rise could undermine the “cost of living” election pitch to which he is wedded.

A lower-key debate is taking place in Conservative circles. Some Tory modernisers believe the party is vulnerable on the NHS. With hindsight, they think David Cameron should have gone even further in 2010 than ring-fencing the health budget, by proposing an “NHS tax” at the same time. For a party associated with tax cuts, it would have been a dramatic “Clause IV” moment to show voters Mr Cameron really meant it when he listed his three priorities as “NHS”.

Now the idea of an earmarked tax rise has resurfaced. But Tory modernisers hoping to see it included in next year’s party manifesto are likely to be disappointed. George Osborne is adamant that nothing must get in the way of his pledge to clear the deficit without further tax rises. The Chancellor wants another £12bn of welfare cuts, which the Liberal Democrats regard as unrealistic. He wants to run a 1992-style “tax bombshell” campaign against Labour, and has no desire to muddy the waters. If the NHS runs out of cash and the Tories are still in power, they will cross that bridge when they come to it.

Yet the Tories may be missing a trick: what better way to spike Labour’s guns than by safeguarding the future of our universal health service, free at the point of use? After all, as the former Chancellor Lord (Nigel) Lawson noted, the NHS is the “nearest thing the English have to religion”.

The Tories have lost ground on health, breaking their promise of no “top-down reorganisation” with the reforms introduced by Andrew Lansley, the former Health Secretary. Jeremy Hunt, his successor, is quietly impressive as a patients’ champion. His unwritten brief is to keep a lid on the NHS until after the election. It avoided a “winter crisis” but was close to the edge.

It would not take much to propel health right to the top of the political agenda. According to YouGov, when people are asked about the most important issues facing them and their family, the economy is cited by 48 per cent and health is second (37 per cent).

The Treasury has never liked earmarked taxes but there is a precedent. In 2002 Gordon Brown, the then Chancellor, raised national insurance to enable Labour to bring UK spending on health up to the European average. It was that very rare beast – a popular tax rise. However, the proposal was not in Labour’s manifesto at the 2001 election. Even today, Labour is scarred by the “Shadow Budget” proposed by John Smith, the then shadow Chancellor, in 1992. It proposed higher taxes to pay for what Labour assumed would be popular pledges to raise pensions and child benefit, but allowed the Tories to launch that “tax bombshell”.

Health could be a big vote-winner for Labour, which will warn us that the NHS would not survive another five years of Tory-led government. “We will have a big offer on the NHS,” a senior Labour source promises. But how big? David Axelrod, Mr Miliband’s star signing from America, believes that “the biggest risk is taking no risk at all”. In one form or another, a tax rise for the NHS is coming. Who will have the courage to jump first?

Miliband’s man brings a touch of the West Wing

“The candidate matters,” David Axelrod, the American political consultant who helped Barack Obama win two presidential elections, told Labour officials at party HQ on Thursday at his first briefing since being hired by Ed Miliband.

At one level, it’s a statement of the blindingly obvious. And yet some Labour folk argue that the party can win with big policy ideas and a different vision for Britain, because we do not have a presidential system. However, the Conservatives are determined to make the general election a “choice of two Prime Ministers”. No wonder. YouGov found this week that 36 per cent of people believe David Cameron would make the best PM, with Mr Miliband trailing badly on 19 per cent.

Mr Axelrod’s private briefing raised spirits at Labour HQ. “Everyone felt they were in The West Wing for 45 minutes,” one mole told me. After a two-day visit, Mr Axelrod said he left more optimistic about Labour’s prospects than when he arrived.

It remains to be seen how much time he will spend in Britain. Not much, I suspect. The main man may turn out to be Larry Grisolano, another veteran of the Obama campaign.