Factcheck 4: A very often-heard comment in the media or from the general public is that “There isn’t enough money to fund the NHS”. A fairer system of taxation could go a long way to address this issue.
Factcheck 1 Does the NHS already have enough money?
Factcheck 2 Is the NHS a funding ‘black hole’?
Factcheck 3 Is there ‘too much waste’ in the NHS?
Latest in our Factcheck series from Sally Ruane
Sally Ruane is a member of Keep Our NHS Public Executive. She is a member of the Institute for Applied Health Research at De Montfort University, Leicester. She has published in books, academic journals and magazines in the UK and Spain.
Our unequal tax system
The tax system needs to change so that it is fairer and raises more money. The tax system we have is stacked in favour of people on higher incomes and with greater wealth. For example, most people pay 13.25% National Insurance on any income above £120 per week. But someone who earns more than £50,000 a year pays a much lower rate of national insurance – just3.252% – on that income above £50,000.
Another example is Council Tax where the person living in a house valued at £1m or £2m pays exactly the same amount of Council Tax as the person living in a house valued at £325,000. Take the case of VAT – the lower your income, the higher the proportion of your income you give to Her Majesty’s Revenue and Customs in VAT.
In addition to this, there is very little taxation of wealth (as opposed to income) in this country.
Finally, there are some extremely rich individuals who use tax loopholes and offshoring to pay little or no tax at all.
There is therefore, scope for making the tax system fairer and there are plenty of policy suggestions being made by experts. One suggestion is to ensure that people with high incomes pay the same proportion as everyone else with regard to National Insurance. For example, instead of increasing national insurance payments for everyone in the ‘health and social care levy’, the government could have chosen to levy National Insurance at 12% on income above £50,000 instead of at 2%. This would have raised even more money (about £14bn annually) and not affected low and middle income workers.
Taxing the Super rich
The Sunday Times Rich List in 2021 stated that a combined wealth of almost £600bn was owned by just 171 people, all billionaires. Taxing the super-rich is possible if there is a political will to do it and effective public pressure on politicians.
The Wealth Tax Commission concluded that a one-off wealth tax was feasible and could raise between £80bn and £260bn over five years, depending on how it was designed.
Fixing other, existing wealth taxes could raise additional revenues. Moreover, the Commission found that the public, when presented with options, favoured a wealth tax over alternative tax rises with three quarters of the public wanting to see such a tax introduced.
Tax Avoidance
The government has raised Corporation Tax during the pandemic. This is a significant step which shows the potential role that tax increases for big business could play in funding our services. But raising corporation tax is insufficient without also addressing the issue of corporate tax avoidance.
For example, Amazon reportedly had sales income of €44bn in Europe in 2020 but paid no corporation tax and Virgin Care (then owned by Richard Branson) has also been criticised for paying no or little corporation tax despite billions of pounds worth of Local Authority and NHS contracts. Estimates of the tax gap – the difference between taxes actually paid and taxes which should in theory be paid – vary from £35bn annually to around £120bn depending on what is included.
Analysts have calculated that across the world a nurse’s annual salary is lost each second as a result of global corporate tax abuse and private tax evasion.
Sally Ruane, Executive member Keep Our NHS Public
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