Wednesday, April 24, 2024
HomeCulture WarOur wonderful NHS, part 2: Dissecting the finances

Our wonderful NHS, part 2: Dissecting the finances


This is the second in a five-part series on the inherent flaws of the National Health Service which mean it can never work satisfactorily no matter how much money is poured into it. You can read part 1 here.

LET’S look more closely at the payers and non-payers to the present-day NHS. For example, how much does the individual taxpayer in the UK pay for his or her healthcare?

The official and semi-official statistics are generally as uninformative as they are voluminous. The legendary Rolls-Royce minds at the Treasury concoct tables and charts displaying fatuous abstractions such as ‘health spending per person as a percentage of GDP’, which is about as far from the day-to-day experience of the citizen as you can get. Now that there is a devolved service for each of the nations of the United Kingdom, the potential for confusion and opacity is even greater.

Let’s see what we can do when we fire up our Fiat Punto mind.

Three years ago there were 54million adults in the UK. Of these, 31million of them (57 per cent) paid income tax and 23million (43 percent) paid none. The bottom line to remember: almost half of the adults in the UK pay no income tax. This means that most of them will pay nothing towards their healthcare. For them, the NHS is a pure charity. 

The NHS in the UK spent £220billion in 2020. Almost all this money comes from the public purse, but which of the numerous compartments of the public purse contributed what is a book with seven seals. The sources out of which the government scoops the money for the NHS include national insurance, council tax, capital gains tax, inheritance tax and corporation tax.

A further complication is that national insurance, which pays about 20 per cent to the NHS, is deducted from wages at different rates and at different thresholds than income tax and is paid by employees and employers. In sum, the paying adult contributes bits of money in various proportions scattered across a number of channels. This lack of transparency makes all attempts at rational discussion of NHS finances tediously complex.

Let’s not stumble over detail here: it is unlikely that people paying no income tax are much affected by the other sources of tax, and the NI contribution from this low level will be quite small. Thus, approximating even more, let’s leave it that very roughly 40 per cent of adults pay as good as nothing for their healthcare. They are the ones for whom the NHS was created and they are the ones who get the medical charity. 

Therefore about 60 per cent of adults pay something and get something, irrespective of what they pay. Exactly how much the something that is paid amounts to is impossible to formulate simply – a single number here would be meaningless and misleading. A more specific answer might be possible, though. 

The vast majority of taxpayers (approx 83 per cent) are in the basic rate band, currently between £12,571 and £50,270. They pay 20 per cent of their taxable income to the government and further, more obscure amounts, in employees’ national insurance. A further dollop comes from employers’ national insurance, one of the many stealthy ways of pretending not to remove money from the general public whilst doing exactly that.

For individuals, the only way of working out their NHS contribution is to begin with their total tax payment in a year, including their national insurance contributions. Since a total amount of around £220billion (in 2020) out of a total spend of around a trillion (£1,000 billion) goes to the NHS, we can see that approximately 22 per cent of these deductions from income go to the NHS. These numbers are open to wide degrees of interpretation and qualification. 

For the sake of simplicity, in the following calculations of generic cases we shall ignore national insurance. This does, however, contribute 20 percent to the income of the NHS, so is certainly not trivial.

So, at the bottom of the basic rate band (£12,571) a person earning £10 above the allowance will pay about £2 in tax, of which 22 per cent, £0.44, goes to pay for the NHS; at the top of the band (£50,270) the taxable income is £37,700, the tax paid on that is £7,540, from which £1,658 goes towards the NHS. A person in the middle of the band pays £1,105 to the NHS. But these contributions are not wholly dedicated to the taxpayer’s own healthcare – 43 per cent of this money is in turn going towards paying for the healthcare of the 23million people who pay nothing. 

If we deduct the money that goes to pay for the non-payers, a taxpayer at the bottom of the basic band is paying about 19 pence for the healthcare of the lower earners and 25 pence for his or her own healthcare; the person in the middle of the band is paying £475 for the healthcare of others, £630 for his or her own; a taxpayer at the top of the basic band is paying around £713 for the healthcare of others, £945 for his or her own.

Twenty-five pence won’t get you a lot of healthcare these days, nor will £630, meaning that the high taxpayers are not only paying for the non-taxpayers, they are also topping up the contributions of the low-taxpayers. 

Fortunately for the continued existence of the socialist business model, the relatively small number of rich taxpayers in the two higher allowance bands are there to be soaked and make up the missing contributions. Around 480,000 top rate taxpayers pay more tax in total than the nearly 28million in the basic rate band. Without the plutocrats, the NHS would really be in trouble.

This rattletrap financial construct works (insofar as it can be considered to work at all) only as long as most people are mostly well for most of the time. Since the supply of cash is permanently choked, the ‘service’ has to be throttled, too. Thus, in the deep midwinter, when medical need gets out of hand, the NHS is always and always will be in crisis. It’s a soup kitchen.

Just don’t mention children, who fall completely outside of the numbers we have used so far. They represent pure costs without any contribution. It wouldn’t be unreasonable to add the number of children in the population – avid consumers of healthcare services – to the number of adult non-payers of tax. That would really bend the numbers. Another day, perhaps, but in passing we might just note that the marked decline in birthrates since the postwar baby boom has done a lot to keep Nye Bevan’s soup kitchen going.

As already pointed out, our calculations ignored the income from national insurance. In practice, NI contributions currently cover about 20 per cent of the total cost of the NHS, but since this is coming from the employed one way or another, albeit with different bands and percentages, the figures given here are good enough for our purposes: the tax cost of the NHS contributions will be smaller, but made up for by national insurance. 

If you think you can do better, fire up your Rolls-Royce mind, open a spreadsheet and get cracking.

Next: The NHS as a cult.

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Richard Law
Richard Law
Richard Law is a retired businessman and software engineer, widowed, with a grown family. He lives in Switzerland.

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