George Bull

Written by: George Bull

George Bull

Senior Tax Partner

Tax and NHS funding – what can we learn from the Singapore model?

In weekly tax brief, we've previously looked at the possibility of designating a new slice of income tax to help fund the NHS. Research in respect of NHS Wales suggests that, if demand for healthcare increases in line with predictions, by 2048 the health service will consume 66 per cent of the Welsh budget, which could explain why Plaid AM is calling for a 1p income tax increase. 

If hypothecation has a role to play, it looks as though a larger tax levy will be needed for a longer period of time. Taken together, changing health population and demographics; the availability of new, expensive treatments; the rising cost of social care and the mismatch between services which cause bed-blocking, represent a complex range of symptoms for which there is no simple treatment.

To put it another way, no matter how imaginatively the tax system can be used to plug the NHS funding gap, it does look as though the current mismatch between public demands on the NHS and the financial resources available to it produces a situation which is not sustainable in the medium-long term. We therefore wondered how other countries manage this.

Singapore offers universal healthcare coverage to its citizens, with a financing system anchored on the twin philosophies of individual responsibility and affordable healthcare for all. This is how the Singapore Ministry of Health illustrates the way the system works:

Singapore healthcare model

The first tier of protection is provided by government subsidies of up to 80 per cent in acute public hospital wards. The system is underpinned by Medisave, which is a compulsory, individual medical savings scheme intended to allow practically all Singaporeans to pay for their share of medical treatment without financial difficulty. These personal savings plans may not be sufficient for large healthcare bills so Medishield provides a range of insured schemes to help with large bills. Finally, Medifund acts as a safety net for needy Singaporeans. An important feature of Medisave is that the individual medical savings account is portable across jobs and after retirement.

The Singapore healthcare system is not cheap, but neither is the NHS. And it has its critics, but so does the NHS. While the concept of affordable healthcare for all will be readily recognised in the UK, the way that the Singaporean government uses a combination of subsidies and a mandatory savings system to promote individual responsibility seems to go a long way towards tackling the problems which beset the NHS.

But it all sounds very different from the current NHS funding structure. Even with the necessary political willpower and public acceptance, how would the UK begin to make the transition?

Maybe national insurance records hold the answer. Almost all UK citizens, permanent residents and workers have a national insurance record which details the contributions they have made. It would be possible to use those national insurance records to compute individual opening values for people's UK Medisave accounts. These initial deposits would not be withdrawable; they could only be used for a future medical treatment along with other qualifying benefits. As part of these reforms NIC would then be abolished, to be replaced with a new mechanism to collect medical savings contributions and to fund other benefits.

I'm not for one minute suggesting that this is a complete solution. And I completely recognise that, whatever the solution, it will not be simple. But perhaps there are elements of the Singapore model which could be transitioned into sustainable funding for the UK NHS.

 
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