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Health and Taxation

Why the link between taxation and health status? It may need some explanation that a Professor of Health Policy should write about future options for taxation (read my recent article on this as featured in CITY AM here). It is because taxation has vital effects on workforce participation which in turn condition health status.

People outside the workforce are much more likely to have risk factors for long term medical conditions—obesity, inactivity, depression. They are much more likely to smoke with 60 per cent of unemployed people smoking compared to 20 per cent of those in the workforce.

The proportions of working age adults who are out of the  workforce vary from 9 per cent in Surrey and Berkshire to 40 per cent in smaller towns in the North west and the North east. These differences are the main source of the growing inequalities between regions in the UK with only Scotland showing some improvement relative to London and the South east.

The situation got worse during the ten years of high growth before the recession and the recession is bringing further widening. The gap is increased by movement of more qualified people to the South East so that the local economies lose skills and purchasing power.

We need a strategy to bring about a  signal  rise in work incentives. The first key step would be to shift taxation away from earned incomes towards consumption.  50 per cent of income tax payers with the lowest incomes pay 15 per cent of total revenue. It would be possible to fund a tax free allowance of £20 K by  a broadening of the VAT base to cover food and services. This would also mean fairer contribution to tax revenues from the baby boomers who claim benefits but will pay little direct taxation.

Such a move would have positive regional effects since most of the possible new entrants are outside the South East. It would also be a vital step towards improving health. Already the effect of labour force exclusion is beginning to show across the generations. London teenagers are much less likely to smoke, and binge drink than teenagers in the North. The urgency of change was well brought out by a recent TV programme in which Mary Portas was offering 8 unskilled jobs in Bury attracting 120 young applicants many of them in a poor state of health.  A redesign of the tax system is a vital step towards freeing up our most scarce resource— the drive and ability of young people.

By Nick Bosanquet (pictured above): Professor of Health Policy at Imperial College and Associate Volterra Health.

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