Why Andrew Harrop has got it wrong on National Insurance

Recently, Andrew Harrop made four arguments against raising National Insurance contributions to finance the growing NHS deficit. It is noticeable however that at no point does Andrew deny the growing deficit that will become so great that it is likely to engulf the health services and undermine them beyond all recognition. Nor does he make a single suggestion on how this mega gap between health needs and revenue is to be met.

Andrew’s four arguments against are that:

1. A political distinction has to be made between the rise in 2002 and now.
2. This strategy will lead to more cuts after the election.
3. It will feed mistrust and undermine further politicians and the welfare state.
4. It is unfair in that only under-65s will bear the cost – although nowhere does he say what this cost is other than implicitly enforcing larger cuts on other programmes to maintain in real terms the NHS budget.

Objection one – The circumstances are so different this time that all manner of detrimental political fallout will occur, unlike in 2002, when the one penny increase in National Insurance was greeted with massive approval.

The best guesstimate of the NHS annual deficit will be £30 billion in six years – a third of current expenditure. Andrew has no answers whatsoever in how this gap between what health needs will be and the revenue forthcoming to meet them can be bridged. Until he comes up with an alternative to the National Insurance proposal to fill half the deficit (the other half must come from new ways of delivering services), his arguments look pretty feeble.

His second objection shows that he has misunderstood what is being proposed. He alleges that the strategy would mean more cuts after the election in all other unprotected budgets. But my submission to Labour’s Policy Review argues that this is not a sustainable strategy as a means to protecting the health budget. It hasn’t protected the health budget up until now – it only partially covers the NHS inflation rate – and a further Parliament of protecting health, education and overseas aid in this way would also mean some departments suffering real cuts of a third in their budget since 2010. That strategy is unsustainable – hence the search for a new approach.

His third objection – that it would feed mistrust and undermine politicians and the welfare state – again misunderstands the politics with which we will be faced in the new Parliament. Distrust there will be if we do not face, and gain a mandate for dealing with the NHS deficit. Either there will be radical changes for which we have no mandate, or the growing financial crisis will engulf the NHS and social care.

His fourth objection similarly misunderstands the reform being proposed to the Policy Review. Andrew alleges that it is basically unfair as National Insurance contributions apply only to those below state retirement age when it is those over this age who increasingly benefit from NHS and social care services. My proposal to the Policy Review is that all the income of the ‘grey vote’ should become eligible for the penny increase in National Insurance contributions, so as to cover the social care costs. Many won’t pay but those who have substantial pensions, or continue to work, or who have income from both, will certainly make contributions to the bills of which they are a primary driver. In the transitional stage pensioners can opt out of the scheme and be subjected to the current means-tested assistance for their care.

Frank Field is the Labour MP for Birkenhead