14 March - NHS Funding need not damage business health

The Institute of Chartered Accountants' Tax Faculty has today (Thursday) emphasised that the need for any increased taxes to fund the National Health Service should not be at the expense of encouraging enterprise and business. The Government appears to have pencilled in a sum of about £8 billion extra for the health service. Currently, the total spend on the NHS is about £60bn out of total Government revenues of circa £400bn. In other words, the NHS consumes about 15% of Government expenditure.

How might the Government raise this extra money without borrowing? The Chancellor has ruled out raising income tax rates, but that will not prevent him from restricting income tax reliefs. For example, he could restrict tax relief on the personal allowance to the basic rate of tax. This measure would cost higher rate taxpayers about £800 a year and might generate about £2bn. More likely, however, are rises in the rates of VAT and National Insurance. For example, current receipts from VAT are about £60bn, the same as spend on the NHS. An increase in the VAT rate from 17.5% to 20% would provide about £8.5bn, comfortably providing the extra cash required. Receipts from National Insurance also total about £60bn and a combination of higher rates of NIC and raising of the upper earnings limit could also raise the £8bn required.

Ian Hayes, Chair of the Tax Faculty at the Institute of Chartered Accountants in England & Wales said, "Raising tax rates is never going to be popular. The Chancellor has a number of ways in which he can raise the money, but any decision will have a knock-on effect on UK business. The danger is that if he gets it wrong, the shock may well damage the UK business and the enterprise economy. These are the keys to prosperity which the Chancellor has done so much to encourage and upon which the UK's healthy tax revenues are based."

Hayes added:

"A balance needs to be struck. However, we urge the Chancellor to continue his drive to encourage enterprise and to attract business to the UK by keeping taxes and burdens on business competitive. In the long term, this will help to ensure prosperity and result in rising tax revenues."

-ENDS-

Notes to Editors:

  1. The Institute of Chartered Accountants in England & Wales is the largest professional accountancy body in Europe, with more than 120,000 members. Three thousand new members qualify each year. The prestigious qualifications offered by the Institute are recognised around the world and allow members to call themselves Chartered Accountants and to use the designatory letters ACA or FCA.
  2. The Institute operates under a Royal Charter, working in the public interest. Its primary objectives are to educate and train Chartered Accountants, to maintain high standards for professional conduct among members, to provide services to its members and students, and to advance the theory and practice of accountancy.

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