Tax rise needed for NHS: where does our money go?

Taxes may have to rise to historically high levels in order to protect the future of the NHS, according to a new study from the Institute for Fiscal Studies (IFS).

The report warns that every British household will need to pay an extra £2,000 a year in tax, to help the healthcare service cope with unprecedented demand and an ageing population.

Both the IFS and The Health Foundation, which also worked on the study, believe high taxation is the only option to prevent a decline in the NHS, celebrating its 70th anniversary this year.

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“UK spending on healthcare will have to rise by an average 3.3% a year over the next 15 years just to maintain NHS provision at current levels, and by at least 4% a year if services are to be improved,” the report says.

Niall Dickson, chief executive of the NHS Confederation, which commissioned the report and represents 85% of NHS bodies, said: “This report is a wake-up call. And its message is simple - if we want good, effective and safe services, we will have to find the resources to pay for them.

“The scale of what we face is not widely understood. Over the next 15 years in the UK, there will be four million more people over 65, and the prospect of a 40% increase in hospital admissions and further large increases in the number of people with numerous long-term conditions.”

Meanwhile, The Spectator reports that Theresa May has decided to increase the NHS’s budget by 3% a year for each of the remaining four years of this Parliament.

The news magazine claims that the prime minister has overridden Chancellor Philip Hammond’s concerns that such large sums would be difficult to afford.

But the IFS and Health Foundation study suggests that even this increase may not be enough, with the resources needed far outstripping any tax pledges, says The Guardian.

The joint report says that over the past 70 years, spending on the NHS “had been paid for by reduced spending on defence, housing and debt interest”, but warns that “none of those alternative sources of income would be available in the future”.

Instead, the money would have to be found from the three main sources of government revenue: income tax, VAT or national insurance.

So, where do our taxes go?

For the past four years, the government has sent an annual summary to each household to show how their payments of income taxes and National Insurance have been spent.

According to the most recent figures, health spending is second only to welfare in terms of the distribution of public sector expenditure.

In 2016-17, the authorities spent £172.7bn on welfare, which amounts to 24.3% of public spending. Other areas of big spending include £91.6bn on state pensions and £39.4bn on servicing the national debt. Overseas aid, meanwhile, accounts for just 1.1% of public sector expenditure each year.

Infographic provided for The Week by Statista