Lib Dems back idea of special tax to aid NHS

The Liberal Democrats have proposed taking control of hospitals and schools from central government and giving them to independent "housing association style" organisations.

A radical report on the reform of public services, also proposes that some Whitehall departments – health and education, for example – could be merged.

The consultation paper on reform of public services, to be discussed by MPs and delegates at next month's spring conference, gives the party's strongest hint yet that it may introduce a health tax to pump millions more into improving hospital care.

The report, which makes no firm proposals, suggests voters would be more willing to pay more tax if a special earmarked health tax were introduced. The "hypothecated" tax could come from general taxation or increases in national insurance contributions, the paper says. "Further use of hypothecation would have advantages. It would underline the commitment to the relevant public service. It would make decisions about tax rates at budget and election time clearer in their practical consequences, helping accountability."

The paper also suggests that hospital patients make "top-up payments" for improved services, such as food or television, beyond medical care. "This might take the form of allowing for extra payments for better meals in hospitals, for example," the report says.

"Such schemes could encourage some affluent individuals to stay in the state system rather than choosing to make private provision."

The consultation paper, written by a working group led by the MEP Christopher Huhne, hints strongly that taxes may have to rise to improve the health service. It says a special health tax would make a rise easier to sell to the public.