Want your cake and eat it too?

Or why the UK tax system is so muddled, especially the NHS. And ideas for fixing it.

HMRC — people shudder when they get post from them. And the old £1 coin, our new 12 edged one comes out and this one is not legal tender come November, so a handy reminder to cash it it, or better yet, donate extra pound coins to a charity of your choosing!

I’ve stopped eating my porridge to write this, which means the bugbear is driving me mental now. I love porridge. Everyone knows cold porridge is rubbish. However, watching the Chancellor, Phillip Hammond, on The Andrew Marr Show, made me nuts again.

Andrew brought up the funding issue we have in the UK with the NHS; too many people, not enough beds, NICE not approving enough new drugs, etc. The usual. Hammond made an excellent point; having a health system based on demographics AND people in work is always going to be a problem — it is based on an inherently weak premise. We currently have circa 63m people in the UK and yesterday in The Times it was stated by 2020 we will have a population of 70m. What? How? Where? We are not a large island. The growth with come from natural growth (difference b/w births and deaths), and from net migration pushing up new arrivals to Britain (see Brexit.)

The key fact here is that the population is ageing. We are living longer, and the stats are a bit worrying for anyone running the country’s finances:

1. By proportion alone by 2025 people over 65 years are expected to make up 20% of the population, compared to 14.1% in 1975.
2. Over that same period, the proportion of children 15 and under is anticipated to fall from 24% to 20%.
3. Circa ONE QUARTER of the UK population will be over 65 in 2045.

The rest of the stats are just as scary, more than 3.2 million will be in their eighties by 2025, and a further 770,000 in their nineties, compared to — just last year — 558,000 and 2.6 million. An ageing population means fewer people of working age contributing to the government kitty, so there is less money to support people of pensionable age, and it puts extra pressure on already stretched services, such as the NHS, families, and other social care systems.

Let’s take the NHS (National Health Service), established post-WWII in order to make good healthcare available to all, something I think we can all agree is an excellent idea. It doesn’t cover eye tests or glasses, or dentistry, and you pay a flat fee for prescriptions (£8.40, but when older you can be exempt from paying, or in other circumstances), but it does a good job. The problem with the NHS lies in many areas (there are far too many trusts spread across the country, no centralised buying so the price a hospital pays for paracetamol can range from £0.02p to £1 depending on where they buy from, there are not enough beds and then there is the inability to service the ageing population) Dementia on the rise is a real issue. However, the hospital isn’t the right place for those with dementia, because nothing can be done for them there, but families will drop their loved ones there when they need a break, or are going on holiday (I am NOT making this up, sad stories like this are becoming far too common in the news) but there isn’t appropriate social care in their community to handle this issue, and many families aren’t equipped to deal with this. When the NHS was founded in 1948, it had a funding value of £437m (about £15b at today’s value), and today (for the 2015/16 year) their was £116.4b approximately set aside for the NHS, which employs about 1.5m people.

By 2020/21 budget, the projected cash for the NHS is £133.1 billion.

Yet that still will not be enough. That is to maintain the status quo, which is failing many, and badly.

{{I’m just sitting here for a moment and letting all that sink in.}}

We like taxing here in the UK; to be fair, all of Europe likes taxing. We are good at it. So just look at this long list of things that get taxed by the government to raise the needed funds to keep this glorious isle (and Northern Island and the Channel Islands) going:

£681.8b is how much the government took in tax receipts in 2016. It is projected that will rise to £716.5b in 2017. That is a lot of pound coins (anyone want to venture a guess as to how many times we could circle the earth with £681 billion pound coins?)

How does the country collect all that money. Taxes, duh. Lots. We have:

1. *NIC (National Insurance Contribution — originally meant to cover NHS, but doesn’t anymore, it is a payroll tax, a small portion is technically assigned to the NHS)
2. *Income tax (read here to figure out this stepped system of pain)
3. *VAT (currently rated at 20%, some items exempted like children’s clothing, also applied to things like utility bills)
4. *Car tax
5. *Fuel duty tax (85% of petrol cost in the UK is just tax)
6. Tobacco tax
7. Alcohol tax
8. *Insurance premium tax
9. Airline passenger duty tax (APD, adds about £75 to fly into the UK, enjoy your visit!)
10. Capital gains tax
11. Inheritance tax
12. *Stamp duty (yes, if you buy a house, let’s say for £500,000, you pay the government £15,000 pound just for being able to buy your own house. And no, they don’t send a card, or a bottle of bubbly. They just take your money, and don’t ask what happens if you DARE own a 2nd property. Taken to the cleaners then.)
13. *Council tax
14. *TV License tax (to pay for the BBC, and keep commercials off it)
15. Corporation tax (20%)
16. Business rate tax
17. The EU tax (again, see Brexit, getting rid of that)
18. And others I can’t recall. I think my brain is blocking them as a protective measure of sorts. Plus, the caffeine hasn’t hit me yet.

Anything with an * next to it is something that almost any British person of working age pays. If you are a teenager, you are paying VAT if you buy a Coke or a Starbucks (but Starbucks doesn’t pay taxes in the UK, just to be clear...), and if that teenager has a weekend job, NIC and income tax gets deducted from their pay once they hit the threshold. Some of the above taxes are indirect (tobacco, alcohol) and some direct (income tax, NIC, council tax).

If you took an average British person and use £100 as a baseline, they get to keep £35.12 when the government has shaken you like a sofa trying to get change from behind the cushions. How? First, you lose the NIC and Income tax taken from your pay. Then, you pay council tax, road tax, VAT on utility bills, and tax on your home and contents insurance so you feel secure enough about leaving all your things to go out. If you put £16 of petrol in the car, and spend £15 on a meal, that takes more. If you happen to be a smoker (awful habit, give it up, it costs upwards of £7 a pack anyway), you pay tax there. You go see a film (La La Land and Moonlight so you can figure out who deserved to win Best Oscar), and pay tax on the ticket price. After the film, you have a drink at your local, and bingo, more tax. So all that in TAX (not cost of everything, just the tax you are paying) equals £64.88 going to Her Majesty’s Government. Ouch.

This is a circular way of getting to what got me in a high dander this morning. We are due to get a ‘budget update’ or whatever we have changed it to, because now we will only have the Autumn Statement, as opposed to doing it twice a year. Journalists love this, they spend weeks guessing what will be done to show that the government is looking out for the working man, but not killing off the high rate taxpayers too. Walking a tightrope.

So we go back to the Chancellor’s statement made this morning that it doesn’t make sense to try and fund a service based on demographics. I think I’ve shown that the demographics aren’t going to move in favour of lots of things, especially the NHS, anytime soon. So we have to think differently. I know, how unreal. Is that allowed in the government?

Ideally, I think a flat tax would make our lives simpler, and keep the list above a heck of a lot shorter. It stimulates the economy, it is proportional, and it makes sense. But we keep tinkering, and the tinkering has got us up to at least 20 taxes, which is sheer madness, but keeps the Treasury and the Office of Budget Responsibility (OBR) and the Bank of England busy I suppose.

Flat tax = less paper!

What if, upon the age of 21, when most British citizens are in work, and if they are making over the living wage, from 21–30 they had to pay £10 extra per month and that money was explicitly ring-fenced for the NHS? (Yes, I am aware I just introduced another tax, but this one has a point, where lots of the others don’t, and ideally this is done in conjunction with a flat tax, which is unlikely.) Then, from ages 31–40, you contribute £15, and from 41–55, you contribute £20, and from 55 to retirement (65-ish) you contribute £15. You can put income levels in for ratchets, or whatever is needed, but you get my gist.

According to the 2011 UK census (last super reliable numbers) in the age 40–54 bracket you have 13,364,000 people. Let’s assume 70% of them work (recent stats show approximately 75% are in work), so we have 9,354,800 people who are paying an extra £15 a month. That equals an additional £140,322,000 million monthly ; £1,683,864,000 Billion ANNUALLY— and that is just on one segment of the eligible group to be taxed.

If I take - again from the 2011 census, the total of all the people in the age groups I cite above, and use £15 as the mean number (as it is reflected in the largest age swath above) the result is staggering. Even my other half had to check my numbers (and he works in finance) but he couldn’t believe me when I declared I’d gotten us to over a billion in tax receipts annually. In case anyone wants to see it, below is the formula: I used £15 for contribution, 70% is in work (current average sits at at or just above 75%,) then I take the monthly number for ages 20–64 (£610,890,000) and multiply that by 12 months, then divide by 70% to get the final amount annually for the NHS contribution.

40,726,000 x £15 = £610,890,000 monthly x 12 = £7,330,680,000 / 70% =£5,131,476,000 billion annually

But the NHS has a problem, and it needs to be fixed, fast. They have made an 18 week promise; that you have the right to to start consultant led / right to referral treatment within 18 weeks of your GP (General Practitioner doctor) seeing you and referring you on for further treatment or tests.They aren’t many trusts meeting this deadline. Why? Lack of beds, staff, and surgical theatres, and not running a ’24 hour’ NHS. We like to talk about ‘blocked’ beds; usually by the elderly that are a danger to themselves due to dementia or unsteadiness, but there isn’t anywhere else to send them. It isn’t unusual to see or hear of people left on gurneys’ in the hallway of hospital A&E departments waiting hours to be seen, or after assessment, hours for a bed to be found for them. If you need significant treatment, for something like anorexia, you can wind up in a facility hundreds of miles from your home.

As with many things, money is what is needed. And no one wants to pay more tax. But out of all the taxes I have to pay, I can actually see the sense and value of this. As a country, we made a lovely pledge to give the same access to healthcare to all our citizens, but in reality, today, that simply isn’t happening. We can fix it, and we have to fix it. So we need to stop thinking down traditional lines, and convening committees, and writing white papers, and do something.

This may not be THE thing. But hopefully it will start a discussion, or part of it will become the answer. Because we need one, and fast.

Kristine is Anglo-American, a Brooklynite by birth, living in Britain, with Irish sass from my dad. Wants: wine, whisky, lots of sleep. Ecommerce / digital / tech geek. Sports mad, especially for Serena Williams and Lewis Hamilton. Wants to be in Cornwall, and listen to the sea.

Also, Kristine would like to point out she isn’t an economist, nor does she work in finance, but rather just pays attention and has never, ever used her overdraft facility from her bank, and hates debt. Also taxes. Loathes those. However, she has worked in politics and loves working on new ideas and solutions.