The Tories must choose between lower taxes or the NHS

Discontent in the British Conservative party goes beyond frustration with the erratic leadership style of Boris Johnson, and his low poll ratings. Many feel that the government is failing to deliver on a distinctly Tory vision of how to run the country – one that is business-friendly with light regulation and low taxes. Shadow leadership contenders, the Chancellor Rishi Sunak, and Foreign Secretary Liz Truss are both trying to capitalise on this discontent. But there is no way out, which is why Mr Johnson may yet limp on until the next election.

Item One in this discontent is the government’s covid strategy. Many Tories feel that it is too heavy-handed and too beholden to cautious experts. Leave the public to make up its on mind on precautions and take the consequences, they suggest. Their thinking is plainly muddled, and out of touch with most voters, but at least as the virus morphs into something a bit less deadly, so policy can move on in their direction.

Item Two is Brexit. In Tory eyes this was meant to be a great liberation from bureaucracy, which would allow “buccaneering” British business to achieve its full potential. And yes, one prominent Tory did use that word, referring to licensed pirates on the high seas back in the 17th and 18th centuries, at whose modern equivalent the Russians’ advantage is surely unassailable. In fact businesses have been mired in even more form-filling, associated with imports and exports to the European Union, which surrounds the country, and is thus its readiest partner for both. Some remember that it was much simpler back in the 1960s before Britain entered the Common Market – failing to understand how the world has moved on. Meanwhile rolling back regulations has been happening at a snails’ pace, as the regulations were more than a bureaucratic whim, and aimed to achieve a public good – which has to be achieved in an alternative way. Downing Street has resorted to pointing to crowns printed on beer glasses and the changed colour of passports as among the main achievements of Brexit. And that is before the insoluble problem of Ireland is brought into the picture, ever capable of exploding with dire consequences. In fact most Brexit voters, including the former Labour-voting ones that Mr Johnson so successfully courted in the 2019 election, never much cared for deregulation as a reason for Brexit. They wanted to see more restrictive immigration policies – which the Tories have indeed delivered. But that has brought more bureaucracy, and snarl-ups due to labour shortages. Tory MPs’ business friends are not particularly happy, even as Tory voters are now a lot less worried about the issue.

And Item Three is taxes. They are going up, both corporate taxes and national insurance, levied on people in work and their employers. This is nominally to pay for grasping the nettle on the emerging social care crisis, but in fact the money will disappear into the National Health Service, which has been completely disrupted by the covid crisis, and now has massive backlogs for routine care. The Tory discontents say that above all they should be a party of lower taxes (especially on businesses and the rich, sotto voce) – and that this is a betrayal. Mr Sunak hints that if it was left to him, he would be cutting taxes soon. Most people outside the Conservative Party wonder if he can possibly be serious. With little room for manoeuvre on the budget deficit and national debt (and if you don’t think such things are relevant, high inflation suggests fiscal excess) the only way this vision can be delivered is by cutting government spending.

At the heart of this is rising spending on the NHS. Since the party regained power (in coalition) in 2010, the government has attempted to cap NHS spending so that it just about kept pace with inflation. But as the baby boomers age, and skew the ratio of older people, demand has been rising at a higher rate. The financial pressure has caused system resilience to be reduced, and this is one of the causes of the now alarming backlogs. Tory hopes that NHS costs are containable are based on two fallacies and a misconception. Fallacy One is that demand can be met through making the service more efficient. Any user of the service can point to inefficiencies in this massive, bureaucratic behemoth of an organisation. But that comes with the necessary scale and complexity of what the healthcare sector is trying to do – international comparisons show that Britain’s health services are amongst the world’s most efficient. But these same comparisons also show that in many areas Britain’s health services less effective. We are, to quote The Times columnist Matthew Parris, “getting a second-rate service for the cost of third-rate one.” This is not what the public wants, and further cost restraint is liable to mean the service becoming third-rate all round.

Fallacy Two is that faster economic growth can allow spending to keep up with demand. Alas the headwinds against growth in a modern, developed economy are many, and I have written about these many times. That demographic problem that is stoking up demand is not least among them. Besides there is plenty of evidence to suggest that the wealthier people become the more demand there is for health services. Which leads me to the misconception: which is that excess demand for the NHS arises because it is free. That suggests that there should be ways of persuading the public to make do. But the problem is that the effective NHS monopoly on health care limits supply. Other systems are much better at mobilising private money – and where they do, demand is higher, not lower. A large and growing healthcare sector is one of the features of any modern, developed economy, however it is financed. Resisting it will breed discontent.

That points to an answer. If Britain could move healthcare to a public insurance model, such as the Netherlands or Australia have, the public would both get a guarantee that their basic needs will be met, and the mobilisation of private money to pay for a world-class service. I have been to Australia quite a bit over the years – and one thing I hear very little of is discontent with its health system. And Aussies know how to be discontented. But such a shift, as surely almost all Tories know, is an impossibility. For all its faults, the public has become attached to the system. And trying to mix more private money into it would be seen as a betrayal of its ethos. Doing this as a open public policy is clearly suicidal. But doing so by stealth, by restraining the public service while allowing the private sector to grow, is problematic too – although exactly this has happened to dentistry and optometry already. If wealthier people are paying big taxes for a service they don’t use, it will create discontent, and reducing their taxes will starve the public service, making it even worse. Neglect of the NHS under the Conservative governments of 1979 to 1997 was one of the reasons that support for the party collapsed in the 1990s. And one of the reasons that Mr Johnson did so well in 2019 was by promising to invest a lot of public money in the NHS, amongst other public services.

But people can pay more tax. Taxation in Britain is not especially high by European standards. If the system is well-designed the harms can be limited. Tories will have to embrace this, unless they want to challenge the public shibboleth of the NHS. Instinctively many Conservative MPs understand this, and they may realise that Mr Johnson represents the best way of postponing this awkward choice, and they may well let him muddle on.

What Conservatives should be doing is developing a new vision for the 21st Century that embraces higher taxes and a well-funded NHS at the heart of a flourishing health economy, based on world-leading health research and development. This is perfectly credible, unlike world leadership in buccaneering.

One thought on “The Tories must choose between lower taxes or the NHS”

  1. This deeply reasoned post raises some interesting issues.

    I agree that we will need to soldier on with our NHS. The only other country in ‘the West’ to have a state-funded national health service is to the best of my belief Denmark; and they manage to have a much higher level of taxation than us. Perhaps we should study how they do it? But, to mobilise private money, I do think that the NHS principle of equality needs to be qualified by an explicit right of the consumer to purchase ‘add-ons’ to NHS care in suitable cases: such as the purchase of additional safety (e.g., in health tests, and some cancer operations); and in the purchase of home equipment to enable more care in the home. Liberal values are to put personal autonomy above equality.

    Another more political issue lies in the future on the Tory party, as a party attaching importance to property rights (hence low taxation low regulation and business-friendly), and which normally combines moderate right-of-centre attitudes with being the party of ‘the Establishment’. It has been a successful formula. However, as the party has become more democratic and more in the hands of its right-wing grass roots, it seems to be becoming increasingly at war with experts: first with the educational establishment (viewed as ‘the blob); then over Brexit; and now over the handling of a pandemic. So, might they cease to be the establishment party? As a normal right-wing party they would retain votes in traditional labour areas. But what about the areas of professional middle class commuters who are often part of the establishment and also experts themselves in their own areas? Would not these people switch to a moderate centrist progressive party, not attaching too much importance to property rights, if either the Lib Dems or Labour can assume this mantle?

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