Think tank calls for NHS tax

Fabians want people to know how much they spend on the NHS

A leading left-wing think tank has called for a dedicated "NHS tax" to be clearly earmarked in people's payslips.

The Fabian Society, in the final report of its independent commission on taxation and citizenship, argues that taxpayers need to be "re-connected" to the public services funded by their taxes.

People feel disconnected from their taxes, they don't know where their taxes are going

Fabian Society

The think tank - which is affiliated to the Labour Party - also released details of research indicating that most people do not know what their taxes pay for but that tax cuts are less popular with the public than increased spending on key public services.

The poll, conducted by ICM, suggests that 80% of people want the government to spend more while only 16% called for tax cuts.

Early press reports suggested that Health Secretary Alan Milburn had some sympathy with the proposals, but this was later denied by the Department of Health.

The report is likely to be badly received by the Conservative Party, which is entering the run-up to the general election campaigning on a tax-cutting programme.

Public is 'disconnected'

The research showed that people felt disconnected from the way their tax money was being spent and from the political process itself.

I think people would be far more ready to pay tax if they knew some of it is going directly into the health service

Dr Tony Wright

"The only way around this, given that they do want higher quality services, is for politicians to be more clear about where the money is going.

"And for there to be more accountability and some kind of objective assessment about how effectively the money is being spent," Labour peer and commission chairman Professor Raymond Plant told BBC Radio 4's World at One.

The commission proposes an Office of Public Accountability to assess how effectively tax revenue is being spent.

Lord Plant said there was a particularly strong case for hypothecation - or earmarking - of taxes in the area of health spending, because it was something that affected everybody.

"If we want a year-on-year improvement there has to be some kind of infrastructure that will sustain this improvement," he added.

The Treasury has dismissed the commission's report as a "superficial" and a "presentational gimmick".

Taxing high earners

But the Labour chairman of the Commons administration committee, Dr Tony Wright, said he thought the chancellor was "willing to go down the route" of hypothecation, having allowed to a certain extent for environmental measures.

"I think people would be far more ready to pay tax if they knew some of it is going directly into the health service," he told the same programme.

Professor John Hills, director for the analysis of social exclusion at the London School of Economics, said it was unwise to a tie a variable revenue source to a particular service.

Among the reports other suggestions was that higher earners should be taxed more.

But the report, two years in the making, also argues that the government should not raise the overall level of taxation at the moment.

Instead it proposes that ministers wait until the increased spending in services produces noticeable improvements.

'No interest in tax cuts'

The report does, however, look ahead to a time when a national debate could take place on whether the UK's share of taxes as a proportion of national income - now 37% - should rise closer to the European average of 41.5%.

The commission's report also proposes a new top rate of income tax of 50% on incomes over £100,000 a year - a proposal ruled out by New Labour before the last election.

A new 50% top rate could raise £3bn, the Fabians argue, and could take 800,000 people on low incomes out of income tax altogether.

'High time'

Responding to the report, the Liberal Democrat's Treasury spokesman, Matthew Taylor, backed the commission.

"Liberal Democrats pioneered the principle of linking tax to expenditure so that people know what their money is being spent on.

"It is high time the government accepted these arguments," he said.