Health and Social Care Levy Bill

Lord Hannan of Kingsclere Excerpts

2nd reading & Order of Commitment discharged & 3rd reading
Monday 11th October 2021 Lords Chamber

[Lord Hannan of Kingsclere (Con)]

My Lords, that is one way of putting it. This Bill has been so hacked about from every Bench, so lacerated, that it seems an act of almost wanton cruelty to take out my own cleaver and join the mob. In the spirit of balance—at least, of karmic balance—let me therefore at least preface my remarks by saying that this is a good problem to have, in one sense, because we are talking about a problem caused by improvements in medical care and increased longevity, and we are looking at ways in which the wealth of an increasingly well-off society can spill over into the social care sector.

In the end, wrote Goethe, in what has always struck me as the single most depressing line in the whole corpus of European literature, we are all King Lear. Of course it was not quite true in his day and it is not true today, but we have a challenge, like every developed country, in ensuring that we are not stretched out upon the rack of this tough life any longer than necessary.

I wanted to agree with what I thought was a devastating takedown of the proposals by the noble Lord, Lord Eatwell, but I am going to disagree with one aspect of his remarks where he spoke about the reduced proportion of GDP going on health and social care. That strikes me as not a great measure. A more useful metric is what is the absolute amount. If you can grow an economy very quickly then a smaller proportion of that economy can be a much larger sum. It therefore seems to me that the question, if we are looking at how to fund this or indeed any other aspect of our welfare system, is where we strike the balance between getting instant revenue now by raising taxes and ensuring that that growth continues, thereby generating future surpluses. If, as in this case, we are looking at the prospect of increasing costs—because I think we can reasonably expect that longevity will continue to increase and that there will continue to be medical advances—how do we ensure that it is funded sustainably and that we do not, in removing money from the productive bit of the economy now, reduce the overall size of the economy and so damage future revenue?

However, I agreed very much with what the noble Lord said about the craziness, as we come out of the worst downturn that we have had—worse than anything we saw in either war or in the recession—of taxing jobs. Of all the ways that we could be raising revenue, this seems to me the most misconceived. On the contrary, we should be finding ways to reduce taxes on employment and investment so that, as furlough ends, we encourage people and firms to be investing and hiring more, thereby of course generating more economic activity and, in the medium term, more government revenue.

I would be very happy to see national insurance scrapped. If we consider the case made against it by the noble Lord, Lord Lipsey, and my noble friend Lord Lansley, it is quite difficult to see why anyone—I agree with what the noble Lord, Lord Lipsey, said—would invent it today. I very much support my noble friend Lord Forsyth of Drumlean’s idea that we should be honest and merge it with income tax and stop the pretence that it is somehow a hypothecated tax paying for social care. Of course, Governments will never do that, because they will never admit the amount they are actually taking in income tax—so they pursue the strategy of having lots of little taxes to add up to one big one as a way of disguising the overall tax burden.

I also agree with the noble Lord on the absurdity of hypothecation. It is not that it is a bad idea, but that it is impractical. It did not work for Gordon Brown and has not worked for any other leader. It is impossible to devise a system where a Chancellor cannot simply substitute a different budget. It has defeated every attempt at doing so.

Finally, I agreed with the noble Lord, Lord Eatwell, when he spoke very truly and said that it is in the nature of taxes to go up. That has been true of almost every tax, going right back to the introduction of income tax as a temporary measure to pay for the Napoleonic Wars. Governments find that they do not have the revenue they need and have to widen and deepen the tax. So let us be clear what we are talking about; it is going to be a ratchet, where there is constant pressure for higher budgets, higher caps and so on.

Why are we doing this? Why have we picked this tax and this method? And why, as every other Bench has asked, are we doing it in such a hurry? I was very struck by how few people in the other place on the Conservative Benches voted against it. My right honourable friend the Minister, with commendable honesty, described it as a

“permanent … increase in the size of the … state”.—[Official Report, Commons, 14/9/21; col. 844.]

That is absolutely right. How many people on Conservative Benches in either House went into politics in order to pursue a permanent increase in the size of the British state? Yet there were only something like five Conservatives in another place who voted against it.

I suspect that that is because, when asked in isolation, this measure polled very well. It always does. If ever you phrase an opinion poll question as “Should we raise taxes to pay for”—insert desirable thing—you always get a very large yes, because people have been conditioned by our political discourse to hear the question as “Are you a nice person? Are you selfless or are you greedy?” They cannot tick a box in that opinion poll that says “Well, only if it is accompanied by efficiency gains”, or “Yes, I will happily fund more clinicians, but I don’t want to fund more NHS diversity officers”, or “What has happened to the £20 billion that has already been spent?”, or “Could it be done with the following priorities?” So they say yes because they do not want to look ungrateful.

My noble friend Lord Tebbit, when he was the Conservative chairman, once said that the only opinion poll on tax that matters, the only question that elicits a valid response, is “Do you feel that the amount of tax you personally are paying is too low, too high, or just about right?” I suspect that, when people see the implications, not least the second-order implications, of there being fewer jobs and therefore less overall revenue and slower growth, there will be a very different attitude.

Of course, your Lordships do not need to worry about opinion polls. The function of this House is precisely that it can take a longer view and bring perspective to these questions. It is clear, if you look at the long view and take a proper perspective, that the way to have growth and an economy that can then more easily accommodate increases in healthcare, social care and all the rest of it, is by pursuing the formula that has always and everywhere increased economic performance: freer trade, lighter regulation and lower, flatter and simpler taxes.