Monday, 24 June 2013

Debt, Deficit and the NHS

Debt, Deficit and the NHS

" Let us pay for our own National Health Service. Currently it is being paid for by foreigners. We need a tax rise! Might we agree one if it saved the NHS.  "

The coalition government (in 2010) made reduction of the debt its headline objective, yet 3 years on the debt is far from shrinking; it is still growing! We sit in a leaky boat, vote in a captain and crew with the mission to make us seaworthy; the pumps are on, yet we are still sinking ever lower in the water. We must of course fix the leaks, but we can in the short term pump faster.

One great weakness of democracy is that it is almost impossible to win the popular vote by offering to cut services or raise taxes. MPs see it as suicide for themselves and for their party. Cutting services has the extra disadvantage (discussed elsewhere) of putting people out of work, reducing income tax revenue and raising welfare expenses.

My proposal therefore is to raise taxes. If I shook a collecting tin and called the passing shoppers to help restore the bank capital squandered by the financial sector over the last 10 years I doubt I would get so much as a tin button. Some people would volunteer money to fund libraries, some enjoy opera, and some like submarines; but these are divisive beneficiaries. What we need is a goal that is universally popular, such as the National Health Service. Who would not dip into their purse for our beloved NHS? I therefore suggest we all pay this as an additional, specifically earmarked tax, and think of it as paying for the NHS, which we all clearly want [3].

I have done a little research to set the Treasury on its way. Taking figures for England (the regions can follow, or argue a special case), we have a population of 53 million of which 17.3% are under 15, which means an adult population of 43.8 million. The NHS budget for England in 2010/11 was 105 B£, which means £2,396 per working adult [1]. I suggest we all pay this as an additional, clearly separate, tax explicitly to pay for the NHS; and to abolish the deficit.

Mean annual income in Britain is £29,000 [2], so the average person can clearly afford to pay an extra £2,396 in this NHS-tax. But 25% of the population earn less than £14,500 a year and would find this extra tax well-nigh impossible. They will have to persuade a better-off person to fund their healthcare for them; difficult, but not impossible. The wealthy 1% of the population (500,000 people) should find themselves supporting 4 or 5 additional citizens besides themselves; and big banking bosses will have 300 pro bono cases on their list of beneficiaries (if they fully pay their UK taxes).

Some of you will think this is ludicrous?  But it is essentially the system we have at present. With our progressive income tax, we ask those earning 5 times average salary to pay 14.8 times average tax. (There is a still higher rate beyond that.) Our taxes, paid more or less willingly, are used to fund welfare for the less-well-off. Though I currently receive less than the mean national income, I am very willing to pay the tax, and to forgo my share of the NHS budget to let a less-well-off but younger person benefit. For I am over 70 and no longer need healthcare. Palliative care is sufficient for the over 70.

Other readers may wonder if this extra tax would do the trick. Currently it would, but only just. The Deficit this year is 7.1 % of GDP (more than half of which goes in interest payments to debt-holders) [4]. Our national (average) health-spend (public and private) is around 10% of GDP while the NHS part is around 8% of GDP (which, incidentally, is less that comparable figures for USA, France, Germany, Switzerland, and Greece; we are not squandering money on an over-lavish health service.[5]).  A tax hike (as suggested here) would reverse the deficit and start to pay down the debt. As that came down the interest payments would also come down.

Of course, raising taxes has its own depressing effect on the economy, for with less money in our pockets we buy less goods and services. But if we price our goods and services correctly we should be able to sell more abroad.

With 2 more years of the current deficit our debt would grow from 82.8% to 97.0 % of GDP, and interest payments on that debt would rise. Even more alarming would be a change in our credit rating and a rise in the comically low rate of interest (around 2% for 10-year UK government debt). (Comically low because lower than inflation [6].) We do not have time for dithering.

There you are, Ladies and Gentlemen; over to you! Let us pay for our own National Health Service. Currently it is being paid for by foreign capitalists, and entirely for their own benefit.




[3] Tongue in cheek! I wish to point our that we voluntarily pay taxes for things we want.





Ian West, 12 Longhirst Village, NE61 3LT

L. Cawstein

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