Health and social care levy scrapping raises questions over NHS finances

As reported by the British Medical Journal, the health and social care levy, introduced in April to fund NHS backlogs and fund social care, will be scrapped in November, the government has announced

The scrapping is part of a series of tax cuts under newly announced ‘pro-growth’ plans that the government said will encourage businesses to invest.

Announcing the reversal of the levy, which had been expected to raise £13bn a year to help cut NHS waiting lists and bolster adult social care, the chancellor of the exchequer, Kwasi Kwarteng, said that funding would be maintained at the same level as if the levy were in place.

The one point two five per cent point increase in national insurance for employers and employees came into force in April and was set to continue in the next financial year but labelled as a separate health and social care levy and appearing as such on payslips. It would have also included pensioners who are still in work.

“Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy,” Kwarteng said.

When the levy was first announced in 2021 there were criticisms that it placed a greater burden on young adults and people on the lowest incomes and that social care would not get a large enough proportion of the funding raised.

In her NHS plan for the coming winter, announced the same day as the levy was cancelled, the health and social care secretary for England, Thérèse Coffey, said there would be £500m of additional funding for adult social care to help people who need support to get out of hospital.

NHS organisations and health think tanks have said that, although it was reassuring that funding commitments would be kept, the scrapping of the levy raised several questions.

John Appleby, director of research and chief economist at the health think tank the Nuffield Trust, said the funding ball was now back in the government’s court. “They will have to fund the commitment through some combination of borrowing and deprioritising other public spending,” he said.

NHS Providers’ interim deputy chief executive, Miriam Deakin, said, “leaders of NHS trusts will welcome the reassurance that overall funding for health and social care services won’t be affected by the decision to scrap the health and social care levy, but there are further unresolved questions.

“The NHS budget is being stretched in all directions due to high energy costs, inflation, and the cost of pay awards not fully funded by the government. Now we have the added uncertainty over how the government’s new fund for adult social care fund will be financed.”

Matthew Taylor, chief executive of the NHS Confederation, said that health leaders would be worried by the implications of the fiscal announcement and that there were “big questions” about where the £500mn adult social care discharge fund would come from.

He said, “in the context of rising inflation levels and the pay award not being fully funded, the NHS simply needs more investment to stay afloat and fully meet the needs of its patients. The real terms cuts facing the NHS are at least £4bn this year, which represents the first drop in funding in years.

“There is a yawning gap which is leaving the NHS in a perilous position as local leaders will either have to cut back patient care or accept that waiting times will continue to lengthen.”