Rachel
Reeves will tax businesses to plug £9bn black hole in NHS
The
chancellor is set to announce a revenue-raising budget designed to reset
Britain’s public finances
Michael
Savage Policy Editor
Sat 19 Oct
2024 20.00 BST
Rachel
Reeves is set to use one of the most pivotal budgets of recent times to call on
businesses to pay more tax to help restore the NHS, amid warnings that the
health service has been left with a £9bn hole in its finances.
The
chancellor is expected to stake her reputation on a tax-raising budget
designed as a reset of the public finances. She has already had to deal with
cabinet skirmishes over funding unveiled alongside the statement. However,
Reeves is understood to believe that the public will accept a
multibillion-pound hike in business taxes if it is linked to repairing the
health system’s finances.
The Observer
has seen new research, commissioned in the run-up to the budget by an
influential thinktank with close links to the Treasury and No 10, that suggests
overwhelming support for using an increase in national insurance contributions
(NICs) for employers to fund extra resources for the NHS.
Seven in 10
voters said they would approve of the move if the money raised was used to
increase spending on the health service, according to a poll of more than 6,000
people commissioned by Labour Together.
Only 18%
said they would disapprove. The measure was particularly popular with a crucial
group who switched from the Conservatives to Labour at the last election. About
82% of the group said they approved of it.
The news
comes with sources warning that the NHS needs an additional £9bn this financial
year just to stand still, compared with the settlement it was left by the
previous government.
The figure
includes about £4bn in increased wages agreed by Reeves and the health
secretary, Wes Streeting, after a recommendation by the independent public
sector pay body. The remainder comes from the 2.9% rise needed simply for the
NHS to maintain its current performance because demand is growing.
Sources
across Whitehall said Reeves was putting the NHS front and centre of what is
shaping up to be one of the most consequential budgets of recent decades.
“The
Conservatives crashed the economy and then they ran away, leaving the NHS with
spending plans that were total fiscal fiction,” said a Treasury source.
Reeves has
had to unveil the budget alongside agreeing the immediate spending plans for
government departments, a process that led to huge fallout among several
cabinet ministers last week.
Some MPs
remain fearful about what may happen to unprotected departments, with concerns
that a Treasury desperate to find savings could opt to reduce the taxpayer
subsidy applied to rail fares. That would see ticket prices go up and undermine
Labour’s argument that it wants to tackle the cost of living crisis.
Government
figures said it was now important to show people that tax rises were needed to
reset the public finances and rebuild the health service. “We have to clear the
decks,” said a source. “This is about revealing the real state of the public
finances and how we begin to fix them.”
While Reeves
appears increasingly likely to sell an increase to employer NICs as a
significant element in restoring the health service, she is already facing
accusations of breaching Labour manifesto commitments as she uses a series of
tax rises to bolster the public finances.
The Tories
state that a multibillion-pound increase in employer NICs, as well as a
proposed £7bn two-year freeze on income tax thresholds, would both breach the
Labour election manifesto.
However,
government sources argue that the two measures meet the party’s pledge not to
increase VAT, income tax or national insurance on “working people”. A Treasury
source said: “We don’t comment on tax speculation.”
The flurry
of potential tax rises, including cuts to inheritance tax allowances and higher
capital gains tax on share sales, comes amid signs that Labour is losing its
grip as the party seen as best placed to handle the economy.
The latest
Opinium poll for the Observer shows Labour has narrowly lost its lead on
improving voters’ financial situations. It led the Tories by 6 percentage
points on the issue in July, but now trails the party by a point. It also lags
behind the Conservatives by 1 point on “running the economy”, having led by 9
points after the election.
Yet it still
retains a lead on improving public services, spending government money
efficiently and bringing down the national debt and deficit.
“Labour’s
honeymoon ended a long time ago, but the chances of the budget turning things
around look slim unless there’s a mighty rabbit to pull out of the hat,” said
James Crouch, head of policy and public affairs at Opinium. “The government
should expect a turbulent couple of weeks.”
There has
been speculation that the NHS will receive real-terms increases of between 3%
and 4%, though officials would not be drawn on the figure.
Siva
Anandaciva, chief analyst and an interim director of policy at the King’s Fund,
said it was crucial that higher funding came alongside serious reform. “It is
unlikely that any government would be able to give the NHS ‘enough’ right now
to tackle all the serious funding pressures that have built up over the
previous years,” he said.
“A funding
increase of 4% above inflation would be a significant increase compared with
the years of austerity the NHS endured during parts of the last decade.
“Many agree
that the NHS needs to reform and modernise how it works. So even if the funding
on the table is unlikely to be ‘enough’, the government will need to show that
the extra investment it is providing – at no small political cost if this
funding comes in part from higher taxes – is being used to support reforms to
how the NHS works, rather than just paying for more of the same.”
Sem comentários:
Enviar um comentário