London Daily

Focus on the big picture.
Friday, Jan 09, 2026

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 Prime Minister Starmer Reaffirms Support for Danish Sovereignty Over Greenland Amid U.S. Pressure
UK Support Bolsters U.S. Seizure of Russian-Flagged Tanker Marinera in Atlantic Strike on Sanctions Evasion
The Claim That Maduro’s Capture and Trial Violate International Law Is Either Legally Illiterate—or Deliberately Deceptive
UK Data Watchdog Probes Elon Musk’s X Over AI-Generated Grok Images Amid Surge in Non-Consensual Outputs
Prince Harry to Return to UK for Court Hearing Without Plans to Meet King Charles III
UK Confirms Support for US Seizure of Russian-Flagged Oil Tanker in North Atlantic
Béla Tarr, Visionary Hungarian Filmmaker, Dies at Seventy After Long Illness
UK and France Pledge Military Hubs Across Ukraine in Post-Ceasefire Security Plan
Prince Harry Poised to Regain UK Security Cover, Clearing Way for Family Visits
UK Junk Food Advertising Ban Faces Major Loophole Allowing Brand-Only Promotions
Maduro’s Arrest Without The Hague Tests International Law—and Trump’s Willingness to Break It
German Intelligence Secretly Intercepted Obama’s Air Force One Communications
The U.S. State Department’s account in Persian: “President Trump is a man of action. If you didn’t know it until now, now you do—do not play games with President Trump.”
Fake Mainstream Media Double Standard: Elon Musk Versus Mamdani
HSBC Leads 2026 Mortgage Rate Cuts as UK Lending Costs Ease
US Joint Chiefs Chairman Outlines How Operation Absolute Resolve Was Carried Out in Venezuela
Starmer Welcomes End of Maduro Era While Stressing International Law and UK Non-Involvement
Korean Beauty Turns Viral Skincare Into a Global Export Engine
UK Confirms Non-Involvement in U.S. Military Action Against Venezuela
UK Terror Watchdog Calls for Australian-Style Social Media Ban to Protect Teenagers
Iranian Protests Intensify as Another Revolutionary Guard Member Is Killed and Khamenei Blames the West
Delta Force Identified as Unit Behind U.S. Operation That Captured Venezuela’s President
Europe’s Luxury Sanctions Punish Russian Consumers While a Sanctions-Circumvention Industry Thrives
Berkshire’s Buffett-to-Abel Transition Tests Whether a One-Man Trust Model Can Survive as a System
Fraud in European Central Bank: Lagarde’s Hidden Pay Premium Exposes a Transparency Crisis at the European Central Bank
Trump Announces U.S. Large-Scale Strike on Venezuela, Declares President Maduro and Wife Captured
Tesla Loses EV Crown to China’s BYD After Annual Deliveries Decline in 2025
UK Manufacturing Growth Reaches 15-Month Peak as Output and Orders Improve in December
Beijing Threatened to Scrap UK–China Trade Talks After British Minister’s Taiwan Visit
Newly Released Files Reveal Tony Blair Pressured Officials Over Iraq Death Case Involving UK Soldiers
Top Stocks and Themes to Watch in 2026 as Markets Enter New Year with Fresh Momentum
No UK Curfew Ordered as Deepfake TikTok Falsely Attributes Decree to Prime Minister Starmer
Europe’s Largest Defence Groups Set to Return Nearly Five Billion Dollars to Shareholders in Twenty Twenty-Five
Abu Dhabi ‘Capital of Capital’: How Abu Dhabi Rose as a Sovereign Wealth Power
Diamonds Are Powering a New Quantum Revolution
Trump Threatens Strikes Against Iran if Nuclear Programme Is Restarted
Apple Escalates Legal Fight by Appealing £1.5 Billion UK Ruling Over App Store Fees
UK Debt Levels Sit Mid-Range Among Advanced Economies Despite Rising Pressures
UK Plans Royal Diplomacy with King Charles and Prince William to Reinvigorate Trade Talks with US
King Charles and Prince William Poised for Separate 2026 US Visits to Reinforce UK-US Trade and Diplomatic Ties
Apple Moves to Appeal UK Ruling Ordering £1.5 Billion in Customer Overcharge Damages
King Charles’s 2025 Christmas Message Tops UK Television Ratings on Christmas Day
The Battle Over the Internet Explodes: The United States Bars European Officials and Ignites a Diplomatic Crisis
Princesses Beatrice and Eugenie Join Royal Family at Sandringham Christmas Service
Fine Wine Investors Find Little Cheer in Third Year of Falls
UK Mortgage Rates Edge Lower as Bank of England Base Rate Cut Filters Through Lending Market
U.S. Supermarket Gives Customers Free Groceries for Christmas After Computer Glitch
Air India ‘Finds’ a Plane That Vanished 13 Years Ago
Caviar and Foie Gras? China Is Becoming a Luxury Food Powerhouse
Hong Kong Climbs to Second Globally in 2025 Tourism Rankings Behind Bangkok
×