As with Robert Louis Stevenson's Dr Jekyll, Gordon Brown has two personalities. Most of the time he is the prudent chancellor who created the UK's most successful macro-economic climate for decades. But he is also Mr Hyde - an altogether rougher character who instinctively believes in raising taxes to spend more on public services and redistribution. The chancellor's decision to hike taxes to fund health service improvements shows Mr Hyde is gaining ground.
This year's Budget was well trailed, though there were some nasty surprises in the detail. The promised boost to the National Health Service exceeded expectations, and was paid for out of national insurance contributions as anticipated. The sting in the tail was an unexpected boost to employers' national insurance and a levy of 1 per cent in employee contributions. The top rate of tax on earnings was thus surreptitiously raised from 40 to 41 per cent.
Aware of the likely impact on middle-class voters, Mr Brown extended means-tested benefits to households with up to £58,000 total income in the form of child tax credits. He also mentioned families 50 times in his speech to show that there might be pain but for Middle England there was also some gain.
Scope for munificence came in part from an increase in the assumed trend growth rate, from 2¼ per cent to 2½ per cent. In the light of growth over the past decade this was sensible and, happily for the chancellor, it provides another £4bn to spend by 2006-07. Current spending increases by an average of 3.3 per cent a year over that period, compared with 2½ per cent during the current spending plans.
The additional spending on the National Health Service is a little higher than that recommended by Derek Wanless, the former banker asked by the chancellor to investigate health finance. In his report, also published yesterday, he said the NHS budget should grow over the next five years by just over 7 per cent in real terms.
However, Mr Wanless warned of the difficulties of hitting his target - his growth projections, he said, were "at the upper end of what should be sensibly spent". Labour has already raised real NHS expenditure by almost a third, with relatively little to show for it. Of the £5bn extra provided last year, nearly 40 per cent was absorbed by higher pay.
What happens after the next five years raises more difficult questions. Mr Wanless recommended increasing total health spending from 7.7 per cent of gross domestic product this year to between 10.6 and 12.5 per cent by 2022.
The report assumes private spending provides a constant 1.2 per cent of GDP for health, so the NHS bill would have to rise from £68bn at 2002-03 prices to at least £154bn. Even on the rosiest scenario, that would require real annual spending growth of 4.4 per cent after 10 years and 2.8 per cent after 15. That may be a good estimate of what is needed by 2022 to provide a "world-class" health service. But whether that sort of funding will still be delivered entirely out of general taxation is less obvious.
Mr Wanless said no alternative would deliver a given amount of healthcare "at lower cost to the economy or in a more equitable way". Yet his own report on health services in seven other countries shows other methods of financing produce acceptable outcomes. While it is undesirable to shake up the method of funding at a time when the NHS is yet again being restructured, the issue will certainly have to be reopened in a few years. Far from closing the debate, Mr Wanless has at last launched it.
Indeed, the means by which Mr Brown has chosen to raise the extra money for the NHS raises important questions about the most appropriate form of taxation to pay for this public service. By raising national insurance, Mr Brown has decided that people who work should bear the burden - even though much of the spending is on people whose working lives have ended. If health is to be paid for out of general taxation, it should be just that - taxes paid by everybody.
Labour is boxed in on raising income tax by election pledges not to raise the basic rate or the higher rate. It is also reluctant to extend value added tax to items currently exempt, despite the absurdities of many of those exemptions. Yet it could have decently widened the tax base for the health service by the long overdue reform of combining income tax and national insurance. By not doing so, it has widened the gap between the cost of employing people and their net reward for work - a measure that must have some negative employment consequences.
This question will return all too soon. Although Mr Brown pledged to raise NHS spending by 7.4 per cent above inflation for each of the next five years, his tax increases cover only the next three. Yesterday's tax rises are thus only the first in what will have to be a continuing series if Mr Wanless's blueprint is to be followed through to 2022.
Clearly, if people want a better health service, they will indeed have to pay for it. But their readiness to do so depends on seeing results. Unless the NHS is felt to improve substantially over the next three years, the government's targets may become politically unattainable. And Mr Hyde will eclipse Dr Jekyll in the public mind.
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