Money, money, money. The NHS is short of it. Less doctors, less nurses and less beds per person than almost all of the EU is simply a manifestation of a lack of money. For more headline grabbing stats just Google OECD healthcare report and you can see the NHS is struggling to balance the books and this is hurting outcomes. Today's announcement from the spending review will provide some temporary relief but the underlying funding problems still exist. 

 The government is committed to austerity in the long term although the NHS budget is ring fenced, it is due for further squeezes as the rate of funding growth is outstripped by the demand growth. The rate of funding growth is set to be about 0.8% per year, over the political cycle, the demand is expected to rise by 4% per year. The problem is clear.

So, where will the money come from? Well, I have an idea. It is just that, an idea. It's contentious and by no means what I think should be done. Think of it is an example of chewing the cud, discussing the options and nothing more. So please try to keep an open mind. 

Imagine that all services that the NHS provide has a charge value. A GP appointment or clinic visit is £75, an in patient stay is £100 per night, surgery £500 and a CT scan £150. In a given financial year these charges could be summated and then considered an extra income for tax purposes. So for example, if you received £3000 worth of NHS services, then you would pay income tax on that £3000 of NHS charges. If you were within the tax free personal allowance, no payment would be due. However, as you earn more, the percentage of the charge that would have to be paid would increase in line with your tax bracket.

 

This system has some advantages

1 - the NHS would remain free at the point of end

2 - those who earn more, pay more

3 - would allow NHS budget to rise with demand

4 - the payments would be spread over the subsequent financial year

5 - it may rationalise some of the demand

 

However, it also has disadvantages

1 - what about sole traders, limited companies and other special arrangements (non - dom etc)

2 - what about the elderly, under 18s (parents could pay) or other parts of society

3 - how will these charges be managed and reasoned

4 - will there be limits

5 - would it be fair to pay national insurance and this new tax?

What I prefer, is rather than extension of income which can be taxed, the new NHS charges were taken off an individuals tax free annual personal allowance. This would effectively mean a cap of £2400 per year on 20% tax payers, £4800 for 40% tax payers and £5400 for 45% tax payers. It would also avoid the problem of pushing people earning in the 20% to the 40% bracket by these charges. It would also provide a theoretical maximum charge that could not be surpassed and provide an easier way to collect these charges, through modification of an individuals tax code. These are quite large sums and may require a downward revision for them to become politically acceptable. 

Whatever mechanism and the value of the fees, maintenance of free at the point of need and the spreading of payments over the next financial year are points to consider. If you have no money that month for whatever reason, and you need help, it is still there. If you do not earn well the following year, you will have little or no extra payment. 

As I said, this is not my sole opinion, just an option I think may be worth discussion in a sea of ideas that are also worth discussion. I would love to hear your ideas. 

Alternatively, just place a 0.5 - 1.% transaction tax on corporation non domiciled in the UK for tax purposes. But that, would be a discussion for another day, I am not brave enough to tackle that one right now.

I would love to hear your thoughts on this and if you think there is a better way.


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