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If you had £100bn to spend on health, would you spend it on the NHS?

​No. Instead introduce a ‘participation income’. This is a taxable income transfer to all those who participate in society. Participation is broadly defined, including those who work but also those who care for children or the elderly and can include those who volunteer.

Let’s assume we want to spend ~£55 billion on this participation income, leaving around £45 billion for the NHS. The value of the participation income will be £1,200 per year (~£50 per week) for every adult and every child. This still leaves £5 billion to spend on administration.

The participation income could be taxed at approximately current income tax rates – although I assume that the rate of taxation applied to the participation income is the same as the highest threshold in which you pay tax on your incomes. So, for a household of 4, this would mean an additional £4,800 per year for a family earning less than £11,000 per year (the bottom 5% of the income distribution).

Lifting incomes by this amount will reduce inequality. It will reduce food insecurity and increase housing stability. As a result, it will reduce morbidity and mortality, especially for those at the bottom of the income distribution.

For example, cross-national evidence on the link between social protection spending (such as a participation income), suggests increasing social protection spending by this much may lead to a 10% reduction in all-cause mortality. This will mainly be driven by reductions in alcohol-related deaths (a 20% reduction), cardiovascular disease (a 12% reduction), infant mortality (a 16% reduction), and tuberculosis (a 30% reduction).

Increasing incomes and affordable housing will also improve mental health. A participation income would lift many people out of poverty, reducing their risk of depression and anxiety. Much smaller increases in incomes for low-wage workers reduced depressive symptoms to a similar degree as a course of anti-depressants, suggesting that a participation income may curb rising costs of treatment for mental health services.

However, it is possible that this increase in incomes may lead to more unhealthy behaviours. For example, smoking and alcohol consumption may rise. So, too, might consumption of unhealthy foods. These risks could be largely offset by increased taxation on smoking and alcohol, and the impact of consuming more unhealthy foods is likely to be more mixed, with some improving their diet because they have more income.

There is also a possibility that there will be a small reduction in work-effort, particularly among secondary earners in the household. This may reduce tax revenues. The trade-off might be more productivity in work hours, better work-life balance, more free-time to exercise, and stronger social ties within families and the wider community.

A participation income may also generate benefits in other parts of society too. It may reduce free school meals and crime rates while increasing innovation and entrepreneurship.

Would this offset the reduction in the NHS’ budget? In the short-term, probably not. However, over time, the benefits of declining infant mortality and improved healthy ageing may offset these losses. Either way, our population is likely to be significantly healthier.

Aaron Reeves is ​Associate Professorial Research Fellow at the International Inequalities Institute, LSE.

Aaron Reeves7 October 2016

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