Ed Miliband has today pledged to increase spending on the NHS if successful in next year’s general election. Already costing £113bn in 2013/2014, the NHS has attracted much criticism regarding its inefficiency and expense.
The Labour leader has explained that his party’s further increase in NHS spending will be funded by the introduction of a “mansion tax” on homes worth more than £2mn. According to Labour officials the tax could annually raise around £1.2bn – this would constitute a 1.1% rise in NHS spending.
It is important to note however, that between 1997 and 2010, NHS spending doubled, and compared with the aforementioned 2013/2014 cost of the NHS, £1.2bn is a relatively small sum that can only have a small impact.
The impact on the economy however could be large. According to Lucian Cook, director of Savills Research:
“Such a tax would be complex and inefficient, raising little revenue at great potential cost, and could hurt the asset rich, cash poor long term owners of high value property.”
In his report, Taxing Mansions: the taxation of high value residential property, published by CPS in 2012, Cook explains that the UK already has by far the highest property tax take of any OECD country (property taxes contribute 4.2% of GDP compared to the OECD average of 1.8%).
A mansion tax would also unfairly target the income poor, equity rich (31% of properties in London worth over £2 million have been in the same ownership for over 10 years, 15% over 20 years. Price growth has been +89% in the past 10 years and 426% in the past 20 years), and it could potentially undermine London’s position as one of the world’s leading business locations.
Miliband’s mansion tax pledge only adds further to the large volume of tax rises that the Labour party has already committed itself to. According to a report published by the CPS yesterday, Labour’s planned tax policies already could cost the UK 300,000 jobs and £25 billion in GDP over four years.
Introducing a mansion tax in order to improve the NHS is an economically short-sighted policy, and would do more harm than good. NHS funding is indeed a serious issue, and Miliband is right to raise it. If the Labour leader wants to find the funds needed by the NHS – and is not simply gesturing – he may rather want to consider attempting to improve the efficiency of NHS operations.
For example: One such attempt would be a simple proposal to include information on the expiry date of drug patents in the British National Formulary (BNF).
One lesser known, and unnecessary, cost to the NHS stems from the fact that the lifetime costs of two identical drugs may vary dramatically if the patent for one drug expires before the other. Currently patent expiry dates are not known by most clinicians and not taken into account in NICE guidelines. Thus, once a patient is on one medication, whilst it is usually easy to switch them from a branded to generic version of the same underlying drug, it is technically difficult to switch to a different drug within the same class of drug. [e.g. a switch from anti‐epileptic Epilim (branded valproate) to generic valproate is easy; however a switch from Epilim to carbazepine would be difficult].
Therefore patients get locked into a particular drug type and the NHS is unable to benefit from the cost savings that arise when a patent expires for an equivalent drug, and a new generic medication is introduced.
Thus, rather than adding extra complexity and expense to the already prodigious UK tax system in order to squeeze out further NHS funding, a minor revision could instead be made to the BNF.