A tax rise is the only way to save the NHS – but will Philip Hammond be convinced the risk is worth it?

One in three people admitted to hospital in 2015-16 had five or more health conditions, up from one in 10 nine years before, according to new research. It is a world away from 1948 when the NHS was founded.

Since then, life expectancy has risen from 66 to 79 for men and from 71 to 83 for women. One in three girls born today will live to be 100. The number of over-65s will rise by 4.4 million over the next 15 years.

The entire political class now acknowledges the health budget needs a step change in funding to meet this immense challenge, and can no longer limp from one financial crisis to the next. Indeed, the constant missing of targets calls into question the point of the NHS constitution agreed in 2011, which sets out rights for patients, public and staff.

Jeremy Hunt, the health and social care secretary, has won Theresa May’s backing for more money but it is not yet clear whether he will prise enough out of Philip Hammond. The chancellor is trying to limit the budget boost to about 2 per cent on top of inflation, while Hunt is looking for around 4 per cent.

Although there is no guarantee an agreement will be reached in time for the NHS’s 70th anniversary on 5 July, May will surely knock heads together to make that happen. “You can’t have a birthday party without a present,” said one Whitehall official.

The government’s problem is that there is now a yardstick by which the NHS cash boost will be measured. Yesterday the Institute for Fiscal Studies (IFS) and Health Foundation said spending would have to rise by an average 3.3 per cent a year over the next 15 years just to maintain current health provision, and by at least 4 per cent to improve it. With little room for cuts in other departments after eight years of austerity, the study warned that higher taxes are almost inevitable.

Citing opinion polls, Hunt told the Institute for Government think tank this week that the public is willing to pay more tax “providing they can see the money going to the NHS, and … that is not being wasted”. Hammond is not convinced. He might yet try to muddle through without a tax rise, relying on economic growth (even though it is running at an anaemic 0.1 per cent according to figures out today) or, more likely, higher borrowing. But this course might limit the NHS boost to around 2 per cent, which would not even keep its head above water. The chancellor is also reluctant to commit to the 10-year funding plan Hunt wants, so the health and social care secretary may have to settle for four or five years.

Hammond is worried that hiking tax would blunt the Tories’ attack on Labour’s tax and spending plans at the next general election. He is warning colleagues the Commons might not approve a tax rise, since Labour would have no interest in helping the Tories tackle their biggest weakness.

Although health remains Labour’s strongest card, Jeremy Corbyn should attack the Tories over money and missed targets rather than claim the NHS is being privatised, as he did at Prime Minister’s Questions on Wednesday. “A blind alley,” said one Labour MP. It might cheer the already converted but risks missing a golden opportunity to win over people who voted Tory last year.

Tories who oppose a tax increase argue that the bill would fall on hard-pressed younger workers, increasing intergenerational unfairness. The answer to that came in a separate report by the Institute for Public Policy Research, which proposed a 1p rise in national insurance contributions to raise £4bn a year and said NICs should be paid for the first time by people who work past retirement age. A good plan.

The chancellor wants the NHS to promise more efficiency savings in return for more money. He has a point: when the Blair government raised the health budget by 7 per cent a year in real terms, some £7.7bn a year was soaked up by an overgenerous new contract for GPs. Yet there is only so much juice the NHS can squeeze out of the lemon and the IFS report said: “Since 2010 measured productivity in the health service has been growing faster than productivity across the economy as a whole.”

May’s mantra is that public services must be about reform as well as money. Hunt has admitted that he would not have introduced the sweeping structural changes brought in by his predecessor Andrew Lansley, hinting he is open to unpicking them. But Downing Street will only approve tweaks that do not require a health bill, which it sees as a “live rail” that cannot be touched.

Inevitably, there is a Brexit subplot to the cabinet battle. A 3 per cent rise would be worth about £350m a week. Hammond, the cabinet’s most pro-EU member, does not want to allow Brexiteers led by Boris Johnson to trumpet higher health spending as the “Brexit dividend” they promised in the referendum. Putting up taxes would make it harder for them to justify their bogus claim. There is no such dividend.

May will have to overrule Hammond and give the NHS a sufficiently big birthday present. It is an opportunity the Tories simply cannot afford to miss.