NHS will ‘swallow’ additional funds raised by tax hikes, warns IFS

A leading economic think tank has warned Boris Johnson’s decision to hike national insurance and dividend tax will not raise enough funds to tackle England’s social care crisis.

The Institute for Fiscal Studies has warned the 40 year trend of the NHS breaching its budget will lead to the additional money raised by the tax hikes being “swallowed” up by the health service, with little or no funds left for social care.

IFS research economist, Ben Zaranko, said the NHS budget may need to be topped up by a further “£5bn… by the end of the parliament, on top of the more generous plans announced by the Chancellor this week.”

Zaranko warned “a top-up on anything approaching that scale could easily eat into the amount available for social care.”

“If history repeats itself, the ‘temporary’ increases in NHS funding announced this week could end up permanently swallowing up the money raised by the tax rise,” he said in a briefing note.

Yesterday, Johnson announced a tax assault, hiking national insurance and dividend taxes by 1.25 percentage points.

The national insurance uplift will be temporary, with a new health and social care levy being broken out into a standalone 1.25 per cent levy.

The measures are due to come into force in April 2022 and are expected to raise at least £36bn over the next three years.

There are concerns the extra funding raised for the NHS by the tax rises will not be enough to tackle the waiting list of operations and appointments built up over the course of the Covid crisis.

Speaking to Sky News this morning, health secretary Sajid Javid said: “No responsible Health Secretary can make that kind of guarantee” when asked whether the tax hike would be enough to clear the NHS backlog.

Speaking at prime minister’s questions, Johnson said: “This is the first time the state has come to deal with the threat of these catastrophic costs.”