Labour leaders study plans for health levy

LABOUR leaders are considering a 'health tax' as part of their review of spending pledges for the next general election. The idea of earmarking part of the tax bill specifically for the National Health Service is being studied by members of the health team under David Blunkett. 'It's at the early stages at the moment,' one Labour official said.

Some frontbenchers believe it would overcome the lack of credibility about spending, which Labour encountered at the last election. 'Everyone believed we would raise taxes, but we failed to persuade people that we would spend the money we raised on programmes they wanted. This could overcome that problem,' one frontbencher said.

Members of the health team who support an earmarked tax - known as an hypothecated tax - believe it would provide enough money for the NHS to catch up on perceived underfunding of the service. 'It would be very good for the NHS, but it would be hard on other departments, which would have to fight for what they could get,' the source said.

The Government is committed to increasing spending on the NHS in real terms each year. That pledge will be honoured this autumn, but health professionals and Opposition parties still argue that the NHS is suffering from a lack of cash. Spending in 1993- 94 will rise to pounds 29bn - up pounds 1.6bn.

Hypothecated taxes would bring Labour closer into line with the Liberal Democrats, who fought the last election on a pledge to increase taxes by 1p in the pound for education. Paddy Ashdown, the Liberal Democrat leader, has ordered a review of other services, such as health, for which an earmarked tax could be raised. However, Labour's Treasury team is hostile to the idea.