There isn’t much about last year’s general election that Theresa May is in a hurry to revisit, least of all the plan to reform social care by a mechanism that came to be known as the “dementia tax”. The pitch was poor, but the concept deserved a fairer hearing. Outside the partisan frenzy of a campaign, it might have started a necessary conversation about long-term funding to meet the costs of an ageing population.
New research published today lays bare the challenge. A model developed by the Health Foundation, a charity, and the Institute for Fiscal Studies anticipates demand for spending on adult social care to rise by 3.9% a year over the next 15 years. Over the same period, the population over the age of 65 is expected to increase by 4.4 million; and the number over 85 by 1.3 million.
That demographic shift also increases the burden on the health service. NHS spending will have to increase by an average of 3.3% every year just to maintain services at current levels, with steep rises loaded in the short term to compensate for budget austerity since 2010.
The blunt conclusion: taxes must rise or services will suffer badly. Satisfying the projected increase in demand would require extra revenues of between £34bn and £56bn by 2034. That would mean a higher annual tax bill of £1,200-£2,000 per household. The need for health-centred tax rises is echoed today in a separate proposal by a pair of peers and former health ministers – one Labour, one Conservative. Lord Darzi and Lord Prior, working with the Institute for Public Policy Research, suggest a penny rise in national insurance from 2019. Such a levy would generate an additional £12bn a year by 2022 – part of a package of measures that would deliver more than £350m a week for the NHS.
That is the totemic figure advertised by the pro-leave campaign as a bounty to be recovered from EU budget contributions. It is obvious now that no such bounty exists. On the contrary, the Bank of England calculates the gap between the UK economy now and the more buoyant trajectory it was on before the referendum at £40bn – or £900 per household as a cost of Brexit uncertainty.
This puts the government in an invidious position. Money was promised for the NHS. Austerity has eliminated spare capacity without generating new revenue streams. Every independent analysis points to the need for tax rises but politicians of all stripes, fearing that candour on that point carries a political penalty, seek comfort in procrastination and delusion, of which the “Brexit dividend” is an especially preposterous manifestation.
If some good comes from the cynical, dishonest pledges of the leave campaign, it might be a definitive shattering of illusions about NHS funding. There are no shortcuts and no weekly magic bus deliveries of millions back from Brussels. It turns out that Mrs May was reaching for a fundamental truth in her dreadful election campaign: if we want decent services that care for us all, we must all be prepared to pay for them.
