Income tax will have to increase by at least 3p in the pound to deal with the massive pressures on NHS funding and to guarantee future healthcare, the former head of the civil service Lord Kerslake has said.

In a stark assessment of NHS finances, Kerslake said that big questions needed to be asked to ensure that spending kept up with medical advances, an ageing population and the need to invest in hospitals.

Kerslake said: “Health spending needs to rise at least in line with GDP. Arguably, we may need to go faster if we want to match European funding. You might argue there is a discount there because we have a more efficient system. But it’s got to be at least GDP-linked otherwise I don’t think we’ll get there.”

The Institute for Fiscal Studies estimates that increasing NHS spending in line with the growth of the economy, rather than seeing it rise simply in line with inflation, would involve a 3p in the pound increase on all tax bands.

The intervention by Kerskale came after the health secretary, Jeremy Hunt, told the Guardian that the government “will have to put more money into the NHS” to deal with the UK’s ageing population. Hunt was recently granted an extra £205m on top of the £116.3bn originally granted by the Treasury for the current financial year.

Kerslake, who served as head of the home civil service between 2011 and 2014, issued his call for a dramatic increase in health spending in an interview held to mark the end of the Guardian’s This is the NHS series.

Kerslake, who is chair of the King’s College Hospital NHS foundation trust in south-east London, also said:

• The decision of Hunt to impose a new contract on junior doctors had damaged relationships and would be “pretty demotivating” for NHS staff.

• The changes championed by the former health secretary Andrew Lansley, which has devolved powers to GP-led clinical commissioning groups, had led to a lack of clarity over leadership. “When you ask the question who is in charge of the NHS, it is hard to find the answer. The nearest is Simon Stevens [the head of NHS England] but he lacks many of the levers to deliver change.”



• The private finance initiative, championed by Tony Blair to rebuild hospitals, has “locked hospitals often into quite unsatisfactory facilities” and failed to deliver major change.

Kerslake’s main message is that the NHS will need a dramatic – and permanent – uplift in funding if healthcare is to be guaranteed.

John Appleby, the chief economist at the King’s Fund, has estimated that NHS spending is due to fall from 7.3% of GDP to 6.6% in 2020-21. If health spending were to keep pace with economic growth, Appleby estimates an extra £16bn would have to be found every year by 2020-21 to take the NHS budget to £158bn. This works out at 3p on all rates of income tax, according to the IFS.

But Kerslake said that spending may have to rise to the average of the 15 members of the EU before the enlargement taking in eastern Europe in 2004. Appleby estimates that NHS spending would have to increase by 30% or £43bn a year to take NHS total spending to the EU-15 average by 2020-21. The IFS estimates that this would involve an 8p increase on all rates of income tax.



Kerslake says a royal commission should be established to build a national consensus on NHS funding. This contrasts with the way in which Labour’s last prime minister, Gordon Brown, paved the way for an increase in national insurance contributions to fund an increase in NHS spending by commissioning Sir Derek Wanless to conduct a special review.

“We need a royal commission or something very close to it,” Kerslake said. “We’ve got to ask some big questions. What the surveys all say is people want to keep the directly funded NHS free at the point of use. If that is what people want, then what flows from that? More money. More money. Absolutely no doubt about it.”

He said he was open to ideas about the best way of raising the extra funds, but said an increase in income tax to fund a special NHS fund, which would be “hypothecated” to guarantee that it went to the health service, would be the fairest way to raise the money.

Kerslake said: “There used to be a time when the Treasury would never touch hypothecated tax with a bargepole. They are now opening that door and healthcare is the most obvious area for thinking about hypothecated funding.

“I am open minded. I don’t mind which way we go on it, about how we raise the money, but raise the money we must. You could do it in a number of different models on taxation but you have to get to that point of consensus that this needs to happen, that we can’t keep staggering year from year. It is not going to be the way forward.”

Kerslake said Hunt and Stevens should be praised for the extra £3.8bn they secured for the NHS in 2016-17 in last year’s autumn spending review. He also said the government was right to demand NHS trusts deal with their deficits and that Stevens was right to press for £22bn in efficiencies by 2020 and to demand, in the run-up to the election, an extra £8bn in funding in exchange.

“It isn’t a question of either we get more efficient or we get more money. We need to do both,” he said.

Kerslake indicated that he felt Hunt had been unwise to impose a new contract on junior doctors. He said: “When you reach this point, everybody loses really. Imposing new contracts damages relationships and can be pretty demotivating.”