What the budget means for the NHS

The NHS didn’t receive a great deal of specific attention in Rachel Reeves’ budget. She mentioned it, but in fairly general terms around plans to invest and cut waiting lists.

But the overall plan presented by the chancellor effectively incorporates the NHS^[1] into a high tax, high spend economic model. Those revenue-raising taxes^[2] include a long freeze in income tax thresholds, higher rates on property, dividends and savings, plus new levies on gambling and electric vehicles.

And structurally, this arrangement does two things for the NHS. First, it shifts more of the tax burden onto wealth and higher incomes, which may be politically easier to defend when channelling money into health. Second, it broadens the tax base that pays for day-to-day NHS running costs, reducing reliance on borrowing to fund nurses’ salaries or catching up on elective (non-emergency) procedures.

On the spending side, there was talk of protecting “record investment” and a promise^[3] of 250 new neighbourhood health centres.

Reeves said the government was “expanding more services into communities so that people can receive treatment outside of hospitals and get better, faster care where they live”.

This is an encouraging sign of plans to boost primary and community care capacity rather than just pour more money into hospitals. And it could be the only route to a sustainable NHS. For if more problems are dealt with earlier and closer to home, acute care becomes less overwhelmed^[4].

Away from the NHS frontline, the “milkshake tax” – extending the sugar levy to high-sugar dairy drinks – is a relatively small move economically. But it is an important strategic step which shows that the Treasury realises that diet-related disease should be treated not just as a clinical problem, but a fiscal one too.

Even modest reductions in obesity and diabetes can significantly ease future NHS demand and improve people’s chances of working.

That said, critics could argue that it also functions as a kind of “sin tax” because lower-income households spend a higher share of their income on cheap, high-sugar products. So the levy risks being regressive unless it is paired with affordable healthy alternatives and targeted support, so that it changes behaviour without simply squeezing the poorest.

Alongside this, the decision to remove the two-child cap on some benefits pulls in the opposite direction. It is a redistributive measure that should reduce child poverty rather than penalise it.

For the NHS, that matters just as much as any health-specific tax. Children growing up in poverty are more likely to experience^[5] poor nutrition, overcrowded housing, chronic stress and worse mental health. All of these drive higher use of health and social care over their lifetime.

Lifting the cap therefore acts as a preventative health intervention by boosting household resources for larger families, improving the chances that children have access to adequate food, heating and stability.

So in combination, a sugar levy that nudges diets in a healthier direction and a benefits system that no longer structurally penalises the children of larger families could, if well designed and properly supported, start to lessen long-term demand on the NHS. And that could work out to be a better approach compared to simply funding ever-rising treatment costs.

Overall, the budget nudges the UK towards paying more tax now to avoid an even more financially fragile NHS later.

But that comes with risks too. If economic growth, productivity and the UK’s general health do not improve quickly enough, a tax-heavy model with a still-overstretched health service could prove politically and economically unstable.

References

1. ^{^} the NHS (theconversation.com)
2. ^{^} revenue-raising taxes (theconversation.com)
3. ^{^} a promise (www.gov.uk)
4. ^{^} less overwhelmed (www.kingsfund.org.uk)
5. ^{^} likely to experience (adc.bmj.com)
6. ^{^} Seventh Studio/Shutterstock (www.shutterstock.com)