A Tory MP has suggested the solution to the NHS crisis is to increase National Insurance. It is staggering how wrong such a person can be.
That is because there are three solutions to the NHS crisis. The first is to reduce demand. The best way, by far, to do that is to improve the lives of those making the biggest demands on it. The most certain way to do that is by increasing the incomes of those least well off in our communities and to reduce inequality.
Second, the way to solve the NHS crisis is to spend. Government spending always comes before taxation. It is the spending that creates the extra money to pay the additional taxes in an economy that is not operating at full capacity, as ours is far from doing. To make tax raising the condition of extra NHS spending is absurd: that's to suggest we must give something up to have the NHS we need when that's not true because all the resources needed to staff the NHS are lying idle or under-used in our economy right now. So spend first, tax second is the answer and the resources to pay the tax will then be available.
Third, many of the crises in the NHS could be solved by scrapping its absurd internal markets whose only purposes are to increase costs, waste resources, break up the continuity of patient care and feed the fantasies of ideologues. If there is a saving to be had then this is where it is.
But let's assume these issues were addressed, where then should any additional tax be imposed if it was thought necessary to recover the new spending made on the NHS even though financial markets are desperate to buy the new government bonds that only deficit spending can create?
The last tax to be use would be National Insurance Contributions (NIC). That's firstly because these are only paid by those in work. Let's call them the strivers for want of a better term for those who break sweat in various ways to provide for themselves and their families. Many of these people will, of course, be amongst those for whom incomes need to be raised if people are to escape poverty in this country.
Why on earth impose a tax that will actually make the problems the NHS faces increase, especially since this tax change would increase inequality? NIC is not charged on anything to do with wealth, whether it be investment income like dividends, interest or rents. It's also not charged on company profits, or capital gains when people make speculative gains. And it goes nowhere near real wealth of the sort inheritance tax should address.
All of those who enjoyed such things would make no extra contribution to the NHS if NIC was increased: indeed the truly wealthy person living off their investment income would continue to use it without paying a penny more, unlike their hard working neighbour. At the most basic level there is no justice in that. At the more complex level when we know tax is a tool of social policy and inequality is a cause of NHS demand this is sheer folly.
Then there's the fact that the elderly pay no NIC, meaning it would be another subsidy from the young to the old when these subsidies are already crushing prospects for so many young people whether through student loan repayments or so much else.
And there is the fact that NIC is regressive: it does not even manage the social justice of a flat tax because in relative overall terms it charges higher rates on middle earners than high earners.
In that case I can only conclude that the Tory MP suggesting using NIC for this purpose wanted to increase division in society, very deliberately and in many ways.
What tax should we use then? I have suggested more than £20 billion of new taxes on the better off, here. And that is before looking at a genuine wealth tax.
That us where need to start if, and I stress the conditionality of that if for all the reasons noted above, start we must. But whatever happens no one should be increasing NIC.
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When one considers that this edition of the Observer gives space to this Tory is the same one that in its editorial says that Corbyn cannot really renationalise the railways because of something called a ‘deficit’ you realise that the public does not stand a chance of getting to the truth in terms of the zombie economics we are suffering under.
I may have said this before but I’m so sick of the left not waking up to the mendacious neo-lib orthodoxy of ‘deficits’ and ‘austerity’ that I have bought my last ever Observer today.
What a shower they are. Is that the best we can do?
BTW – totally agree with the above. And when you look at the inaction over sugar you know that the obvious strategy of May and her cronies is to over-burden the NHS to make it fail.
Well the old being able to pass on their wealth tax free (like many European countries have) to the young would help bridge some of the inequality? (Or failing that make the nill rate bands applie for each beneficiary (that would incentivize sharing help and equality however it would cost money and unlike other equality moves just take from somewhere for no benefit)There is a distiction to be struck between ‘unearned income’ as some landlords leave management to agencies while others undertake management duties themselves (like mine does) and lumping them together is not right. Also not al ‘earned work truly is. For example even the smallest landlord does more ‘work’ over the year to get less than say the ever so lucrative ‘after dinner talking’ speech a politician might have done. So its not all black and white. Having said that according to my landlord the gov is thinking of charging income tax instead of CGT on property sales so thats better/worse than what you have proposed. So as a quid pro pro a rise NIC’s alongside that I imagine that would be enough for you. Meanwhile no politician is talking about the Duke Of Westminster affairs and all John Mcdonnel can think of is stripping Mr Branson of his Knighthoods but can keep his vast wealth
I suspect there is a great deal in here to argue with
But it’s too confused to do so
NICs are only suitable for funding pensions.
I think you are wrong to criticise the Observer for reporting what the Tory MP said. Surely it is worth knowing that at least one Tory MP is admitting that the NHS is underfunded. In addition could Richard have so effectively demolished his argument about funding if he could only read it in the Telegraph ?
Jeremy Corbyn has always struck me as a tolerant man who can brook disagreement. I am beginning to worry about some of his supporters who seem to be unable to accept that anyone could disagree with him or them.
Obviously you have the right to stop buying the Observer. To do so in the hope of finding a newspaper or website that never prints the views of Tories or never utters a word of criticism of Jeremy Corbyn is to cut yourself off the opportunity to subject your ideas and Mr. Corbyn’s to the sort of critical analysis that they actually need if they are ever to convince voters and be carried into effect to improve things.
Keith
I did not see an ‘admission’ that the NHS was underfunded.
I saw a ruse to pass the burden to fund it onto those who use it whilst avoiding the underfunding by Government and other means. A cost that many under current wage deflation would find very difficult. The Government runs the NHS. Therefore it should capitalise it properly. It has not done that since 2010.
The NHS budget was kept at 2010 levels was it not when Cameron became PM? This means that inflation etc., was not taken account of so that ends up being a deliberate underfunding by the Government under Cameron now taken forward by May (who has just watered down proposals to curb sugar intake etc., that will no doubt maintain pressure on services dealing with ill health derived from unchecked consumption).
I am not cutting myself off from any form of so-called ‘critical analysis’. The reason I will not be buying that ill-informed rag again is because I am well-read on this issue and others (I would not claim expertise however).
The Observer and its weekly sibling are no longer the fonts of critical analysis they were. They have joined the lazy and comfortable consensus that they were originally meant to challenge.
There are richer and better balanced analyses out there that I will enjoy. If I wanted to read right-wing sloganeering I could buy the Daily Mail instead. I will not tolerate it from the Observer.
Please take your rose tinted spectacles about UK newspapers off Keith.
Sam,
How about engaging with what Richard wrote and not the strategic consequences of his proposals?
Or even the strategic consequences you’d like to make up of his proposals?
Ha, ha. Indeed
I’ve just seen that what I just wrote could be misconstrued. For the avoidance of doubt, the ha, ha was aimed at Sam, not you!
This is a wise article unlike the Observer’s. Equitable taxation is your argument but we should also as a nation monitor just exactly how much total tax take is necessary to create government “spending space” given the erroneous but dominant Neo-Liberal belief that taxes and borrowing must fund government spending.
Richard, do you have any insight into how many MPs actually have the right economic concepts in their heads? If not, maybe there is scope here to actually educate them. Invite them to lectures.
Very few
Where would the lectures be?
Hmm…Where the highest concentration of the most popular or influential MPs are? Somewhere easy to get to as well. And those that cant attend have Youtube where they can listen to it later. If someone such as yourself gives the lectures and can use their celebrity to attract MPs to the lectures, we can build momentum. Eh?
It is highly surprising to me that the Tory MP in question holds the views he does yet he is still a part-time doctor. Even if the medical education burden might excuse his lack of economic understanding, he has either never read anything about deprivation and health outcomes, which have been significant ever since modern medicine was invented, or he ignores them, which is even worse.
Richard, “What would the lectures be?” Almost anything but macroeconomics; but specifically organisational economics, i.e. how organisations really work and why the neo-libs in all the parties in particular stuff up the public services’ ability to deliver well and economically. Happy to provide you with some text.
I agree NIC not operable for tax raising ringfenced for NHS funding.
But cannot see logic of your solution i e a wealth tax . You say the elderly and unemployed do not curently
contribute via NIC . Yes. And what about the phakanx of society receiving benefit be it JSA ESA DLA Council Tax duscount / exemption et al ad nauseam ad infinitum?
These are in vast strata the very people who also do not pay NIC but in general use NHS in tandem with the ekderly in astronomicalky greater commensuration than the ” rich” a vast portion of whom go private anyway.
So where is the fairness in eliciting tax from this strata?
Tax is not about paying fro services
tax is about reclaiming the money the state has spent on supplying services in ways that meet social objectives, including redistribution
Your market based logic is false, there is no such market
But why should those who have earned their wealth( and been taxed on it once already directly
and stand to be taxed again indirectly immediately they spend it and indeed again should they
have the temerity to die at some future point) be taxed yet again just because they can affird to be. ?
Yes your argument thus does predicate taxation as a distribution of wealth mechanism but it is
one with which I ( and judging also from the electorate s decision of the past circa forty years since Thatcher
through Blair and Cameron) do not .
You think most wealth is earned?
Why not think a little more about that? Very little is.
I’m interested to know, Richard, whether you think there is a case for (relatively!) wealthy pensioners like me, who have a decent occupational pension as well as the state pension BUT ARE STILL WORKING to continue to pay NIC (whether hypothecated for the NHS or not) – and whether it would raise a significant amount of money.
I propose the ending of NIC altogether in The Joy of Tax
It may be worth taking a read
But, as many have pointed-out: Underfund it. Say “it’s not working”. Sell it.
That is the current “business model”
I note that Virgin is, as always, at the front of the public money queue.
Here’s a nice theme tune to listen to: https://www.youtube.com/watch?v=QNcUnfvFAFI
The theme tune to “The Carpetbaggers”
Who needs TTIP, we have a home-grown IP!
http://newsthump.com/2016/08/23/spending-money-to-make-things-better-only-works-with-sport-insists-government/
I remember speaking to an NHS Trust Finance Director about the absurdity of NHS Trust A invoicing NHS Trust B for services provided from A to B and then having to pursue Trust B for payment as payment by the due date would harm Trust B’s cashflow. Yes he said it is absurd but at least it keeps the accountants busy !
The NHS needa 4% above inflation to survive. I agree with the points about the extra cost of privatisation and marketisation of the NHS. The simplest tax to meet what Richard M proposes is to introduce an annual land value tax to replace taxes on production. It would create greater equality and reduce the North/South devide. It is simple to apply and hard to avoid.