The Tories are edging towards a tax rise earmarked for the NHS – Labour should be worried

May’s advisers have been studying the 1 per cent rise in national insurance contributions introduced by Gordon Brown in 2002, which was earmarked for the NHS as Labour raised health spending to the European average

Jeremy Hunt has waged a clever campaign for more cash (Getty)

First, the good news. Taxpayers get a (small) income tax cut today, as the personal allowance rises by £350 to £11,850 a year for the new tax year. And now the bad news, which ministers are less keen to trumpet: 9 million people automatically enrolled into workplace pensions will see their minimum contribution rise from 1 to 3 per cent of their earnings, wiping out the tax cut for many. More bad news: a tax rise is on the cards.

Although the Conservatives fight next month’s local elections on a platform of “better services, lower taxes”, a sea change is under way behind the scenes. The tax-cutting party is realising that sometimes you can’t have better services without higher taxes, and is edging towards a landmark tax rise to inject more money into the NHS in the year of its 70th birthday.

Jeremy Hunt, the health and social care secretary, has waged a clever campaign for more cash, amid warnings from the NHS that this winter’s crisis could become an all-year-round one. Theresa May has accepted Hunt’s case for a long term settlement, rather than emergency bailouts every year, and that the NHS should get more money this year as it cannot wait until a government-wide spending review next year.

May’s advisers have been studying the 1 per cent rise in national insurance contributions introduced by Gordon Brown in 2002, which was earmarked for the NHS as Labour raised health spending to the European average. The then chancellor was keener on a tax increase than prime minister Tony Blair, who got cold feet at the last minute and tried to persuade Brown to dilute it by cutting taxes in subsequent years. Brown refused, and the NHS got its much-needed money. In the event, it proved the only popular tax rise I can recall.

Today the Downing Street roles are reversed. May is keener on a tax increase for the NHS than Hammond, who is sometimes irritated by Hunt’s invasion of his turf. But the Treasury’s long-standing opposition to earmarking taxes for a specific purpose is crumbling; everyone knows the NHS needs the money. For his part, Hunt insists he is only making the case for the NHS, as anyone in his job would do, and that deciding how to raise the money is a matter for the chancellor.

There is no agreement on how yet. One option is to repeat Brown’s trick and raise national insurance contributions. Another is to improve fairness between the generations by making older people pay more tax – for example, those still in work would no longer stop paying national insurance when they reach the state pension age. Or national insurance could be imposed on all pensioners’ income, even in retirement. Although politically risky for the Tories given their electoral base, they could argue that it would be unfair for today’s hard-pressed workers to pay more tax when the over 65s are the group most dependent on the NHS and social care.

May would like to reach a cross-party consensus to take the politics out of health. No surprise there, as it is the Tories’ Achilles heel. There is growing support in parliament: 98 MPs from all parties including 21 select committee chairs, have urged May to set up a commission on health and social care funding. Brexiteers, led by Boris Johnson, are desperate to present the coming cash boost as a “Brexit dividend”, to vindicate their misleading claims in the referendum. (Hammond, who backed Remain, does not regard that as his problem).

Although Labour has led calls for an NHS rescue, the opposition will be reluctant to allow the Tories to neutralise its strongest weapon. “We won’t vote for a tax rise for the NHS,” said one Labour insider. To win Commons approval, May might therefore have to rely on the Democratic Unionist Party’s 10 MPs; they might have to be thrown some sweeties in return for swallowing a tax hike.

So the path to an NHS tax rise has plenty of obstacles. If May can negotiate them, as I suspect she will, there could be a prize at the end of it. Younger voters would notice the Tories raising rather than cutting taxes and supporting the NHS. The dramatic move would put flesh on the Tories’ “balanced approach” to the economy – bringing down debt and easing austerity by investing in public services. Instead of deriding Labour’s “magic money tree”, which didn’t work for them at last year’s election, the Tories would pick a few juicy apples, while insisting the tree would grow only if the nation’s debt is under control, and warning that it would die as debt rose under Labour’s reckless spending plans.

The D-word will be at the heart of the Tories’ next general election campaign. For now, Labour might mock, but it shouldn’t. The emerging Tory consensus on NHS funding shows that the party is thinking beyond Brexit. Labour will not be able to refight the last war when the next one comes.