How much are we prepared to pay for our NHS?

The British Public love the NHS.  But, when push comes to shove, how much extra are they willing to pay for it? This is not an easy question to ask or answer.  Recent evidence from a large representative sample of the British public has been gathered which sheds some light on this question. 

A public policy survey I conducted last year with colleague Richard Tol sampled over 6,000 people to ask them about their views on the NHS, its funding and how much they would be prepared to pay in extra Income Tax to fund the NHS.  These questions that are core to the Briefing paper I produced as part of our recent GE2017 election series made possible thanks to funding by the Nuffield Foundation.  The results are quite surprising and do not sit easily with the public funding position in the NHS.

Firstly, the sample was asked: The demands on the National Health Service are increasing as the population grows and ages. How should this be paid for?  The alternative answers that the respondents could chose were: 1. Save money on administrative costs; 2. Increasing general taxation; 3. Outsourcing more services to the private sector; 4. Patients should pay when they go to see their GP; 5. Patients should pay for inappropriate use of A&E; 6. Prescription charges should be raised;  6. GPs should open more hours to save money on A&E.

Figure 1 shows the fraction of respondents who chose each answer – where they could tick any that apply. We see that: 28% of people were in favour of saving money on administrative costs, 24% thought people should pay for inappropriate use of A&E, 20% thought opening GP surgeries more hours to save on A&E was a good idea, and 15% of people thought that spending more via higher taxes was appropriate.  The least popular alternatives were that only 6% thought outsourcing to the private sector was the answer, 4% of people thought that paying for GP appointments was a good idea and only 2% favoured raising prescription charges.  These findings are indicative of how the public sees the various policy alternatives.

The survey went on to question the respondents about their willingness to pay for extra NHS spend.  It was made clear to respondents that an increase of 1% in the level of Income Tax would raise about £4.5bn in a year. The level of per person spending was also given to the respondents and then they were asked how much they thought should be spent on the NHS per person in a year.

Looking at the responses was instructive. Around 72% of the sample thought no more additional spending on the NHS was appropriate. This is a very high level of resistance to paying extra Income Tax. Of those who thought extra spending was justified, we divided the sample into those who pay tax and those who don’t.  The distribution of the extra willingness to pay (WPT) is then plotted in Figure 2.  The average Willingness to Pay for the non-taxpayers was around £140 per annum and the average WTP for taxpayers is around £500 per annum. Although it is fair to say that each distribution has a long tail. The more formal econometric analysis suggests that this WPT was related to Social Value Orientation – a popular measure of altruism devised by psychologists. With these figures in mind it is difficult to see that there would be a mandate for the extra tax proposals now being discussed.  Some reflection on these figures suggests that since the majority of people (72%) do not want to see Income Tax raised to fund the NHS then this policy would not command enough support.  However, if the Liberal Democrat proposal of a 1% increase in Income Tax was imposed it would raise around £4.5bn – but this is not enough to solve the funding problems of the NHS. Paradoxically, a significant minority of people would be prepared to pay much more that this to help out the NHS.

The third question which was interesting was to ask people’s perceptions (in percentage terms) of how much of government spending they thought was spent on: Health, Education, Unemployment, Pensions, Defence, EU Payments, Overseas Aid, Government Debt, the Environment and Other items. Respondents were then told what fraction of spending was in each category and asked what fraction they then thought ought to be spent – bearing in mind that they then knew how much was actually spent.  In Figure 3 below we plot the average difference between what they that was actually spent and what, with the benefit of hindsight, they thought ought to be spent.  In the case of the NHS they thought 15.8% of Government Spending was spent on it.  When they were told that actually 19.0% of Government was spent on it they still, on average thought more should be spent – to raise its fraction to 19.3%. This means that they thought around 0.3% extra should be spent on Health. This is graphed in Figure 3, along with the corresponding fraction of extra (or less) spend which people would like to see, on average. This 0.3% of Government spending would mean around £2bn extra funding for the NHS – mainly at the expense of Unemployment (and related) benefit payments and Overseas Aid. This would go some way to solving the current NHS funding problems – but would not make much of a dent in the £30bn ‘black hole’ which Simon Stevens says the NHS will be short of by 2020/21.  But remember, this is assuming total spend is fixed and this is not effected through extra taxation. 

So, the overall message here is that most people do not want to see Income Tax rise to fund the extra that the NHS needs. Moreover, if the NHS needs extra funding they would rather see this raised through saving on administration, or charging for inappropriate use of A&E services. On balance people would like to see a modest shift of existing Government spending into the NHS away from Unemployment (and related) benefits and the Overseas Aid budget.