London Daily

Focus on the big picture.
Thursday, Oct 30, 2025

The cost of the NHS will rise and rise. How are we going to pay?

The cost of the NHS will rise and rise. How are we going to pay?

The last two weeks have seen big announcements on National Insurance, the NHS, Social Care and the state pension “Triple Lock”.
Each of these is dramatic in their own right, with far-reaching implications, but like London buses they’ve all come along together because of a deadline: the October Spending Review. Chancellor Rishi Sunak has set himself the difficult task of paying for the aftermath of the pandemic while simultaneously confronting one of the greatest policy challenges of our times: how to manage longer lives and an ageing population.

Before we dive into the details, the bottom line for Londoners is that we are a net contributor to the national budget with a young population. And as a hub for global investment, London is particularly exposed to international competition when it comes to the cost of doing business. Of course it’s not all a one-way street — many Londoners will benefit from a well-funded NHS and a cap on social care costs, and an ageing population will also provide some commercial opportunities — but the public policy implications of the ageing challenge are particularly acute here in the capital.

The prospect of longer lives should be something to cheer, so why is ageing such a challenge for policy, and why does it pose some particular problems for public spending here in the UK? The answer begins with a strong and simple pattern: as countries get older and richer they spend a bigger proportion of their resources on health and care. This is partly because they want to — as you find it easier to meet your basic needs, you allocate more money and time to your health — and partly because they have to — science has extended our lives but at the cost of more expensive treatments and more time in need of care and support.

At the same time as these costs are rising, in most countries the slow-moving maths of demographics means there will be a smaller proportion of working age people to pay the taxes required. As far as these demographics go the UK is in better shape than many other European countries, and we have also done more than most to bite the bullet on extending working lives by increasing official retirement ages. But the way we have chosen to pay for healthcare, and now increasingly social care, creates a particular challenge for public spending and the tax burden.

Most people in the UK take it for granted that the NHS is free at the point of use and funded exclusively through general taxation, but it is in fact very unusual. Most countries use some kind of social insurance system, often together with co-payments for specific services. Compared to this the UK’s approach is much more progressive — the richest pay the most for the system through their taxes, even as a share of their income, and irrespective of how much they use it. But it also means that the upwards pressure on health spending feeds into upwards pressure on the overall tax burden and squeezes out other priorities for public spending.

So is there anything we can do to prevent the tax burden gradually rising ever higher, with all the knock on consequences for growth and competitiveness? A tax funded NHS is a fixed point across the political spectrum. That means an ever-stronger focus on value for money and productivity across the public sector, something that has been put rather on pause during the pandemic, but which will return front and centre in the Spending Review next month. And it means thinking about how to tax without undermining key engines of growth like London.

And what about the opportunities for London from an ageing population that I mentioned? Another major challenge is ensuring a decent standard of living in retirement. The huge growth in private pension savings driven by auto-enrolment has been one of the stand-out policy successes of the last decade. Many more people are saving into a pension, but most are still not saving enough to deliver the retirement incomes they expect. The Government needs to find ways to increase contribution rates, and the City is the world leader at channelling those savings into investments that will both drive growth and deliver better returns for savers. As London has always discovered, every crisis can be turned into an opportunity with a bit of innovation.
Newsletter

Related Articles

0:00
0:00
Close
UK and Vietnam Sign Landmark Migration Deal to Fast-Track Returns of Irregular Arrivals
UK Drug-Pricing Overhaul Essential for Life-Sciences Ambition, Says GSK Chief
Princesses Beatrice and Eugenie Temporarily Leave the UK Amid Their Parents’ Royal Fallout
UK Weighs Early End to Oil and Gas Windfall Tax as Reeves Seeks Investment Commitments
UK Retail Inflation Slows as Shop Prices Fall for First Time Since Spring
Next Raises Full-Year Profit Guidance After Strong Third-Quarter Performance
Reform UK’s Lee Anderson Admits to 'Gaming' Benefits System While Advocating Crackdown
United States and South Korea Conclude Major Trade Accord Worth $350 Billion
Hurricane Melissa Strikes Cuba After Devastating Jamaica With Record Winds
Vice President Vance to Headline Turning Point USA Campus Event at Ole Miss
U.S. Targets Maritime Narco-Routes While Border Pressure to Mexico Remains Limited
Bill Gates at 70: “I Have a Real Fear of Artificial Intelligence – and Also Regret”
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Saudi Arabia Unveils Vision for First-Ever "Sky Stadium" Suspended Over Desert Floor
Amazon Announces 14 000 Corporate Job Cuts as AI Investment Accelerates
UK Shop Prices Fall for First Time Since March, Food Leads the Decline
London Stock Exchange Group ADR (LNSTY) Earns Zacks Rank #1 Upgrade on Rising Earnings Outlook
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
Essentra plc: A Closer Look at a UK ‘Penny Stock’ Opportunity Amid Market Weakness
U.S. and China Near Deal to Avert Rare-Earth Export Controls Ahead of Trump-Xi Summit
Justin time: Justin Herbert Shields Madison Beer with Impressive Reflex at Lakers Game
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
Giuffre’s Memoir Alleges Maxwell Claimed Sexual Act with Clooney
House Republicans Move to Strip NYC Mayoral Front-Runner Zohran Mamdani of U.S. Citizenship
Record-High Spoiled Ballots Signal Voter Discontent in Ireland’s 2025 Presidential Election
Philippines’ Taal Volcano Erupts Overnight with 2.4 km Ash Plume
Albania’s Virtual AI 'Minister' Diella Set to 'Birth' Eighty-Three Digital Assistants for MPs
Tesla Unveils Vision for Optimus V3 as ‘Biggest Product of All Time’, Including Surgical Capabilities
Francis Ford Coppola Auctions Luxury Watches After Self-Financed Film Flop
Convicted Sex Offender Mistakenly Freed by UK Prison Service Arrested in London
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
×