Test 16 March, 2017

Don't let the NICs crisis go to waste

Before coming on to Philip Hammond, Theresa May and NICs, let me summarise a very strong Reform health conference last Thursday with Jeremy Hunt et al. The strong conclusion was that progress in NHS reform is “painfully slow”, to use the words of more than one speaker. A key reason for that was that governments over the last twenty years have written reform plan after reform plan without actually delivering them. There was a palpable sense of frustration, wasted time and missed opportunities.

Moving onto the Budget, in his statement to the House yesterday, Philip Hammond said that the Government was now committed to honouring all of its commitments in the 2015 manifesto: “Ahead of last year’s autumn statement, the Prime Minister and I decided that however difficult the fiscal challenges we face, the tax lock and spending ring fence commitments we have made for this Parliament should be honoured in full.”

Well, any Chancellor is going to find it hard to cut taxes, increase spending and reduce borrowing. Philip Hammond presumably thought that it would be easier to raise taxes rather than challenge levels of spending. That calculation might now change for the Treasury.

The row also speaks to an absence of principle on tax policy. Because the Conservative leadership campaign was cut short, Theresa May didn’t have the chance to set out her principled thinking (other than on responsible capitalism). She may think she doesn’t need to. In fact she really does. On tax, does she believe in broadening the tax base in order to reduce tax rates overall? Or does she want to take people out of tax at the risk of very high rates in some areas?

Some people are calling for the Prime Minister to call a General Election in order to give herself a mandate for reform. I would have thought that a from-the-heart speech on fiscal policy would go a long way to help. The issues are much wider than those on which Matthew Taylor will report later in the year.

Bringing it back to the NHS, what remains very odd about the Budget statement was that it didn’t say a word on making public services more productive. This was strange for many reasons. Philip Hammond personally made that case when Shadow Chief Secretary to the Treasury and as Secretary for State for Defence (even speaking to Reform on the subject). The Government has been making big commitments to reform and efficiency so far this year, most importantly the digital transformation strategy launched by Ben Gummer. In the Budget, however, the argument had regressed into more tax for higher spending. The NHS is making “painfully slow” progress towards change when it should be in high gear. The Budget should have held the NHS to account for that.

Never let a crisis go to waste, as they say. If the NICs row leads the Government to commit to a broader base, lower rate tax policy and a whole new energy on public service reform, so much the better.