Hypothecation

Ive never been a fan of hypothecation – its clearly not applied when traffic camera’s and parking fines are used as an income source and I think the comments in this article about the challenges of such an approach in the context of the NHS are fascinating and compelling. There is no doubt however that the current system isn’t fit for purpose, particularly in rural areas, where because people live longer everyone assumes they have better health. When you look closely the two things don’t follow each other, but that’s another story…

Creating a dedicated ring-fenced tax to fund the NHS could undermine other public spending areas, the King’s Fund health think-tank has warned.

Committing to a hypothecated tax for health and social care may be part of the answer to the NHS’s funding problems “but on its own it is unlikely to be enough to guarantee a more stable future”, its report, published today, said.

The report examined the arguments for and against a hypothecated tax and concluded the debate was finely balanced.

Hypothecation was “an attractive idea [that] could end up back firing unless the risks are tackled” leading to “even greater public mistrust of politicians”.

One of the risks of hypothecation was the loss of flexibility, which could result in “sub-optimal decisions” on other public spending priorities.

Over the last two parliaments, local government and the criminal justice system have received bad settlements compared to the NHS, overseas aid and pensions, the King’s Fund noted.

If a hypothecated tax were introduced there would need to be “some independent, non-political input” into setting the budget for health and care, it added.

The King’s Fund has previously called for an Office for Budget Responsibility-style watchdog for health.

Advocates of a ring-fenced health tax say the certainty it offers could put an end to the cycle of “boom and bust” funding for the NHS, which has been in place for the past 70 years.