The Government announced this week it is increasing NI to raise £11.5bn for the NHS and social care. This gives Boris Johnson the record for the highest levels of tax and spend of any post war Conservative PM. He is currently spending more on public services that Corbyn promised in 2019, and nearly as much as Blair.
As you can guess I like higher spending, but I think that the plan to spend it is ill judged, and unlikely to survive contact with reality.
In the first instance all £11.5bn will go to the NHS. After 3 years nearly half of it will be taken away from the NHS and given to social care – this will in turn be split between increased funding for care providers, and the costs of capping individual’s contributions to their own care at £83,000.
This means that the NHS gets a permanent uplift of £6bn, and 3 one off payments of £5.5bn to deal with the backlog of patients needing treatment. Most of this backlog is due to Covid, but we shouldn’t forget that waiting lists were rising sharply before Covid happened – the consequence of a lack of investment in the NHS from 2010 onwards.
More money for the NHS and social care is good news, but there is a significant problem – a big chunk of the new money for health are one off injections of cash, rather than an ongoing, recurring uplift.
This means that Trusts will be able to pay staff over time to do more shifts and treat more patients. They won’t be able to use the £5.5 x 3 to hire more permanent staff with one-off funds, or train future staff, or invest in long term expansion of the clinical workforce. Only £6bn is available to do this.
This matters because staff are burnt out. They are exhausted. Asking those staff to take on more work is wrong. They need more money and less work. They need time to recover. They need a permanent solution to staffing problems.
Without those things a short term fix to try and keep waiting lists under control is the wrong solution.
There will be staff who will take on the extra work because they need the cash. Whether this can happen while maintaining patient safety and clinical quality worries me hugely. I worked with GPs and Consultants who worked incredibly long hours because they needed the money, and on at least one occasion we had to step in due to patient safety concerns.
So yes, it is good that there is more money. But this money doesn’t solve the real problem which is an enormous and existential staffing crisis hitting the NHS right now.
But the problems don’t stop there.
There is only £2.5bn for social care, and they don’t get any of it for 3 years. Social care needs billions more now, not in 3 years time. The crisis is here, and urgent. Care homes are struggling with high levels of debt and massive staffing problems. There has been a massive contraction in the UK workforce due to Brexit and Covid, which has left dangerous levels of vacancies across the care sector.
Staff who haven’t been vaccinated won’t be able to work in 2 months time, which will further reduce the workforce.
What’s worse is that the increase in NI in April next year will take money out of carers pay packets, and increase the costs to employers. In the next 3 years there will be less money for social care due to these changes, not more.
At the end of the 3 years there is no guarantee that the NHS will be in a position to give up this funding. The Treasury can simply decide not to give social care any, because the NHS is still in a crisis. The next General Election is due 3 years form now and I cannot conceive in any way how the Government can take £5bn of funding away from the NHS in an election year. It’s just not possible.
So if this policy has so many downsides why is theGoverment doing it?
Because they face a crisis of inherited wealth. The people who voted for Boris are on the whole older, and home owners. The threat of losing their home to pay for care is a massive issue for them, and as a result Boris has to act.
If the Tory Party doesn’t stand for inherited wealth what does it stand for?
The huge problem is that the policy won’t stop people losing their homes. A cap of £83k might be enough to stop someone selling their home in a parts of the UK where houses cost £0.5m, but not in red wall seats where house prices are £100k. And these changes won’t come into affect until after the next General Election.
People are expecting that after this announcement no-one will lose their home due to care costs. But people will continue to lose their home due to care costs. Which is going to cost the Government hard with their core vote. Red wall Tory MPs who gleefully announced that they had voted to make sure no-one has to sell their home to pay for care will be facing some very angry voters over the next 3 years.
The final problems is the maths around how much it will raise. Conservative Chancellors always believe that tax cuts are self funding and they always overestimate how much they will raise from tax increases, which is why their record on debt and deficit is so poor.
An increase in NI is a tax on jobs, and as NI goes up employers will look to reduce their headcount and increase automation. This has already been a strong trend due to Covid, when lots of employers had to find ways to keep their businesses going with fewer staff, and use more innovative approaches.
Pushing up NI will speed up the process of employers shedding staff and increasing the use of automation -which is why so many bars and restaurants are still using apps where you order at the table and have your drinks brought to you as it reduces their reliance on staff.
If employers reduce their headcount there will be less money coming into the Treasury. Which is an almost inevitable consequence of a policy like this.
So great there is more money for the NHS, but it is a lot of money to spend on a policy which won’t achieve what it was meant to.
This all has the feel of George Osborne’s omnishambles budget – lots of cheers on the Commons from Tory backbenches but then a long painful examination of the consequences and lots of regrets.
Boris has increased taxes by £36bn so far – as well as the NI increase he has frozen incomes tax allowances and increased corporation tax. People will want to see something for this money – short waits for GPs, more staff in hospitals. They aren’t likely to get any of those things. This will have consequences.