People want to pay more tax to fund the NHS, Jeremy Hunt says in direct challenge to Chancellor

People want to pay more in tax to fund hospitals, Jeremy Hunt said last night in a direct challenge to Philip Hammond, the Chancellor.

The Health Secretary said people “recognise that through the tax system we will end up having to contribute more” to support the National Health Service.

He added that “there is a willingness to do that, providing they can see the money going to the NHS, providing they can see that it's not being wasted”.

Mr Hunt told the Institute for Government: “From the Chancellor's point of view, he well understands that.

“He has a responsibility to make sure that funding for all public services is within what the public can afford. That's important because the NHS depends on a strong economy more than other public services.

“What's important for the Chancellor and the Treasury is that a long-term plan allows you to make productivity savings.”

The comments inflame an ongoing row in Whitehall between the Treasury and Mr Hunt, who is thought to be backed by 10 Downing Street, about how to fund a £4 billion increase in health spending.

The Prime Minister promised at Easter that there would be a long-term, fully funded deal for the NHS with more resources, after years of historically low spending rises.

Number 10 is understood to be pushing for the Treasury to release up to £4 billion more for the health service to coincide with the NHS's 70th anniversary in July by increasing taxes.

However the Telegraph has been told that Mr Hammond and his aides are pushing back very hard against an increase in tax to pay for the funding.

One senior Treasury source said aides to Mrs May had joined forces with Mr Hunt to push for taxes to rise to fund the spending.

Mr Hammond and his team are pushing for the spending to be funded from budget savings. A Treasury source said: “We can't be a Government that puts up tax.”

Last month, Liz Truss, the Chief Secretary to the Treasury, said a ring-fenced tax to pay solely for the NHS would be a “bad thing”.

Ms Truss said health spending should be paid for from general taxation like other public services. 

Right-wing think-tanks urged the Government not to increase taxes and backed the Chancellor's hawkish position. 

Mark Littlewood, director general at the Institute of Economic Affairs, said: “If the Government is serious about solving the problems the NHS faces, they should be looking at wholesale reform of the centralised system, not throwing arbitrary amounts of taxpayers' money at the issue. 

"Such an approach is short-termist and will only necessitate more large injections of cash down the line. 

"The Chancellor is right to oppose increasing taxation to pay for this - UK workers already shoulder a heavy tax burden. 

"With our ever ageing population, the conversation about healthcare funding should be part of a much wider shake up that involves restructuring the NHS to meet the needs of patients in 2018."

A source close to Mrs May said: “The balanced approach we have taken to the economy means that we can invest in key public services – and we have done that with an extra £10 billion into the NHS. 

“But we have also said we want to keep taxes as low as possible and reduce the debt. Our record has shown we can do those three things.”

A spokesman for Mr Hammond declined to comment.

A report published on Thursday suggested that tax may need to rise to "historically high levels" in order to give the NHS the money it needs to cope with an ageing population.

A new analysis on what the NHS needs to cope with future demand found that UK spending on healthcare will have to rise by an average 3.3 per cent a year over the next 15 years just to maintain NHS provision at current levels.

Funding these projected increases in health spending through the tax system would require taxes to rise by between 1.6 per cent and 2.6 per cent of GDP - the equivalent of between £1,200 and £2,000 per household, the experts said.

Paul Johnson, director of Institute for Fiscal Studies and an author of the report, said: “This time we won't be able to rely on cutting spending elsewhere - we will have to pay more in tax."

Separate analysis from the centre-Left IPPR think tank said National Insurance contributions should rise by 1p in the pound from 2019 to secure the NHS and social care in this parliament.

Sir Simon Stevens, the head of the NHS, warned in March that Government cuts over the past five years have left a £27 billion hole in the National Health Service's accounts.