Chris Powell: Raising taxes is the wrong way to make people pay more for health

'Tax is a black hole. We're aware of what we pay, but how that connects to what we get back is fuzzy'

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Common sense would – and, no doubt, Derek Wanless's final report next spring will – suggest that health services are going to cost a great deal more over the next two decades. Not just because of the possibilities opened up by technological advance, the cost of drugs, the rise in the number of old people, or the £250bn shortfall in the British system during the last 30 years of under investment, but because people in wealthier economies will chose to spend a much higher proportion of their income on the comfort that health care can bring.

It is not a problem that is likely to be solved by putting 2p on income tax. Spending on health is running at between 10 and 12 per cent of GDP in some European countries. It is possible that it will be 15 per cent in 20 years time – double what the British Government spends on the NHS. Is this, and everything else the Government has to do, to be funded by taxes? The Chancellor has said it should, but other forms of compulsory public funding – including social insurance – are worth looking at first. Maybe taxation will be shown to be the best and most practical route, but this proposition needs to be critically examined against the alternatives. The sheer scale of what faces us should encourage thinking more boldly.

This is dangerous territory, where it is important to be clear what is, and is not, up for grabs. The principle that underlies our collective approach to healthcare – that it should be accessible to all with equity and free at the point of use – should be inviolable in a decent society. However, funding and delivery systems are something else. They should be whatever produces the most effective outcome.

The real threat to the NHS comes not from people daring to think of the most user-friendly way of paying for health, but from those who don't and thus condemn the NHS to continued under- provision and an eternity of long waits and cancelled operations.

Is tax really the most attractive way to encourage voters to pay what is necessary for a world-class health service? Voters have a choice – and a history of taking the low-tax option. We are all susceptible to the promise of the same result at a lower price. Tax is just a black hole. We are only too aware of what we pay in, but how that connects to what we get back is fuzzy. We have to find a way to reconnect the public to the costs of health.

This Government has given the NHS huge extra sums already. How is the public to judge whether this is well spent? Surely, people would be more content to pay more if they knew what the health services cost. How much is it for Aunt Mildred's hip or for Grandpa's heart condition? If they saw a bill, as in France, they might be more understanding of the need to support the NHS with more funds.

The drive in the health service is to become more patient focussed. It is not that people working for the NHS don't care about the patients – they care enormously – but the focus is on curing the physical condition much more than dealing with the human being. The complaints that show up in patient surveys are all to do with communication – being kept in the dark, treated as though they weren't there – and the endless waits.

As there is no built-in mechanism to encourage everyone to treat the patient as a customer, the system resorts to a myriad orders from on high telling everyone how to behave. With a million employees, this comes close to the Soviet Union's command and control system. Against these needs, a hypothecated or earmarked health tax is an anaemic solution that would do little to reconnect patient and cost, or service and patient.

An over busy service, stretched beyond its capacity, does not seek extra custom. So patients are discouraged. Who would want any more when they are already too busy? This leads to an attitude that members of the public do not find in other aspects of their lives, where their custom is assiduously sought. They are unwilling to put up with it. Patients do not always feel the centre of attention and are kept in the dark about how much everything costs. No wonder they are unlikely to be willing to fork out much more in taxes. We have to see if the continental alternatives, which provide a market in health but ensure that all are covered, would do better.

It is rightly claimed, however, that the NHS is highly efficient. By spending below the European average, but treating large numbers of patients, the service is efficient. It isn't that health care has suffered from under-provision by producing a glaring difference in health outcomes and life expectancy, it is that the service in Europe, with its lack of waiting and offer of choice, is far more responsive to patients. This can only be achieved with much higher funding levels, to provide the necessary surplus capacity to offer immediate treatment. This is less efficient, but much more welcome and likely to win public support for its finance.

Too much cant is talked about the NHS. In some ways, it reflects the age it was born into. An ethos of rationing and being told what is good for you. In others, it is a long way from where it started. Equity is muddied by private health for those who can afford to jump the queues. Dentistry, optical services and prescriptions are means-tested. Much is provided by the private sector – pharmacy, drugs, cleaning, building, labs.

We need an NHS for the 21st century, providing a standard of customer orientation that its patients are used to in other aspects of their lives. But we won't get that if they can't be persuaded to pay much larger sums. Let's have a real debate.

The writer is the chairman of the Institute for Public Policy Research and chairs a health authority