With councils such as my own threatening to “ration” social care, and having a one year £7m deficit I am not surprised, what is the argument for not rationing health care. Liberals believe that there has to be encouragement for self sufficiency and autonomy and choice at an individual level. Co-Payments for health is another form of taxation, and if universal and equal will be regressive. The answer is to have means tested co-payments, and of course an opt out: private.
There is no need for basic level tax to rise if we embrace changes elsewhere in the tax system. Land rental tax could replace inheritance tax, or this could change to a gift tax to be more redistributive. VAT is itself regressive…. It could be lower.
Taxes should rise to pay for the government’s £20 billion gift for the NHS, the International Monetary Fund has said as it urged Britain not to take a chance with the public finances.
Britain’s national debt remains “relatively high” and bringing it down “is important to create buffers that will allow the public finances to weather future shocks”, the world’s financial and economic watchdog said in its annual health check on the UK economy.
Its recommendations will be welcomed in the Treasury, which is intent on shrinking the debt as a share of GDP. It is also expected to raise taxes in the autumn budget to pay for the additional health spending announced earlier this year.
However, the IMF’s proposals went further than the chancellor might like. It claimed that the UK had effectively run out of spending that can be cut so should instead raise taxes to meet the mounting costs of an ageing population and to pay for any giveaways.
“After several years of primarily expenditure-based consolidation, identifying further efficiency gains could become difficult. Absent a fundamental rethinking of the size and role of the public sector, revenue measures will therefore need to occupy a more prominent place in deficit reduction efforts going forward,” the Fund said.
Its revenue-raising proposals include aligning the tax treatment of the employed and self-employed, “scaling back preferential VAT rates”, moving from stamp duty to a land value tax and removing the “tax bias towards debt” in interest relief. Past attempts to harmonise employment tax, by Philip Hammond, and VAT rates, by George Osborne, both ran into political minefields and were reversed.
Health should be the first test of the IMF’s strict fiscal principles. the IMF said: “The recently-announced increase in public health spending should be financed from new revenue sources and offsetting spending cuts elsewhere in the budget.”
Areas where savings on spending might still be found are in NHS efficiencies and eliminating the “triple lock” on pensions, the IMF said.
The prime minister’s claim that the new NHS funds would be met by a “Brexit dividend” was dismissed by Christine Lagarde, the IMF’s managing director. “I’m hesitant to allocate any Brexit dividend to the NHS. It’s an issue of timing. You’re comparing apples with oranges. They don’t actually coincide, in timing and in scale,” she said.
The fund made it clear that there would be no Brexit dividend because the fiscal costs of Brexit would outweigh reclaimed budget contributions of around £10 billion a year. Ms Lagarde added that any gains from Brexit would come in the future but the funding demands from the NHS were immediate.
Changes to its GDP forecasts since Brexit show the economy will be about 2.5 per cent smaller than had been expected by 2020, which equates to roughly £20 billion in forgone tax revenue.
“Steady fiscal consolidation remains critical,” the Fund said. Even if there is a messy Brexit, it sees little benefit in launching a fiscal stimulus to cushion a slowdown. “I don’t think that a massive fiscal stimulus would address the nature and the root of the problem,” Ms Lagarde said.
The problem, as the IMF sees it, would be a crisis in the supply side of the economy that would not be helped by pumping up demand. Policies that might help would be to bring forward infrastructure spending but “any easing of fiscal policy should be temporary and embedded in a credible medium-term consolidation plan”, the IMF said.
The Bank of England should provide support instead. “Further withdrawal of monetary stimulus should await clear confirmation of a durable rise in domestic cost pressures,” the paper argued.
• Having more women in banking makes the financial system safer, according to a study by the International Monetary Fund. The presence of women and a higher share of women on bank boards “appears associated with greater financial resilience”, its research found. Having more female regulators is also “associated with greater bank stability”, the IMF said. Christine Lagarde, the organisation’s managing director, said: “I think it is clear that finance would benefit enormously from this greater diversity.” Worldwide “women accounted for less than 2 per cent of financial institutions’ chief executives and less than 20 per cent of executive board members”, the IMF found.