Empty promises? The Chancellor’s offer of extra money to the NHS is misleading. We need to know how he will pay for it

 

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Two thousand million pounds is a good deal of money, even in the context of an NHS that spends about £113bn a year. The cash the Chancellor pledged on Sunday is not all it seems,  though. About £700m has already been promised to the Department of Health. That leaves £1.3bn that might be called “new”, or, as Labour terms it, unfunded.

Political as all this is, coming a few days before the Autumn Statement from a Chancellor whose day job is to win next year’s general election for the Tory party, it would be churlish to heap too much scorn on it. And another £1bn, from fines on the banks for their bad behaviour, will be spent wisely, on improving GPs’ facilities, making them more flexible for patients and taking pressure off hospitals. Such targeted attacks on weak spots in the NHS can make relatively modest sums of money go a long way.

The new chief executive of the NHS has asked for a commitment, and the Chancellor says this extra money isn’t a one-off gimmick but a down payment, at least acknowledging the long-term challenges. At a time when the public finances remain under pressure (see our front page story today), the fact that the NHS has seen the benefit of any discretionary changes available to George Osborne shows that the health service is simply too sensitive an issue to be neglected.

Mr Osborne knows he will never be remembered as the “man who saved the NHS”, but he can do himself and his party some good by blunting the Opposition’s attacks. For their part, the Liberal Democrats would like some credit for pushing the Treasury in the right direction. What is perhaps most revealing about the pledge is that it underscores the Tory advantage on the economy. Such is their lead over Labour on the issue that it appears the Chancellor – who would like to be seen as the embodiment of fiscal restraint – can get away with haziness on how his promises will be funded, as was also the case in David Cameron’s October announcement of a further rise in the threshold of income tax. Mr Miliband and Co would be pilloried for doing the same.

Nevertheless, the state of the public finances should constrain every party as they frame their manifesto pledges. A weak oil price and, much more significant, disappointing income-tax revenues leave little scope for generosity in any part of the public sector. Had things gone according to Mr Osborne’s original plan, the budget deficit would have disappeared by now. It has not; it is running higher than last year.

Still-fragile banks, a struggling eurozone and a slowdown in emerging markets have all been to blame, and all will be part of the economic background for years.

So we are left with a deficit still stubbornly high and “structural”; that is to say, it will remain even if the economy continues to expand at above its trend rates. Mr Osborne hinted yesterday at “difficult choices” in the years ahead. His Liberal Democrat colleague Danny Alexander has been more explicitly gloomy. Ed Miliband and Ed Balls have done their best to dampen their party’s expectations for the restoration of “Coalition cuts”. Only Ukip, the Scottish and Welsh nationalists and the Greens are yet to face up to the financial realities and tell the voters some hard truths about the future of social security, the NHS and much else. Maybe that’s why they’re so popular.

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