Hammond warns NHS boost means no extra cash for defence and police

Philip Hammond has issued a stark warning to ministers that the NHS funding splurge means there is no extra cash for defence and policing.

The Chancellor is said to have drawn a red line at a bad-tempered Cabinet meeting, dismissing the idea that the ‘taps were going to be turned on’.

The tough message came as Theresa May trumpeted a massive £25billion funding boost for the NHS, saying Britain’s ‘crowning achievement’ needed more than a ‘sticking plaster’.

Some £10billion of the rise by 2023 is expected to come from higher taxes, and the PM said there would also be a ‘Brexit dividend’ from money no longer being sent to the EU.

Philip Hammond, pictured left with Jeremy Hunt (centre) at the NHS funding announcement yesterday, is said to have warned Cabinet ministers they will not benefit from similar largesse

The decision could dash the hopes of Defence Secretary Gavin Williamson (pictured right in Downing Street yesterday), who has been banging the drum for more billions more to be spent on the UK’s hard-pressed military. Home Secretary Sajid Javid (left) has also publicly made clear that he wants extra funding for the police.

Funding for NHS England is now due to rise dramatically in real terms over the coming years. Health services in Scotland, Wales and Northern Ireland will also get more money in proportion to the hikes

However, the health service will still need to take a bigger slice of government revenue, with most ministers deeply resistant to increasing borrowing for day-to-day spending.

The decision could dash the hopes of Defence Secretary Gavin Williamson, who has been banging the drum for more billions more to be spent on the UK’s hard-pressed military.

Home Secretary Sajid Javid has also publicly made clear that he wants extra funding for the police.

In a presentation at Cabinet yesterday, Mr Hammond ruled out more money for areas such as defence, prisons, schools and police, according to The Times.

He also suggested far from having any ‘Brexit dividend’ left over, the government would need to find resources to replace other funding currently coming from Brussels.

How tax will rise to pay for NHS boost: The six main ways £25bn is likely to be raised

The NHS funding boost could mean thousands more workers must be pulled into the tax system – or face bigger bills.

The Institute for Fiscal Studies (IFS) has dismissed the idea that there will be a ‘Brexit dividend’ over the coming years – setting out several tax rises that could be used instead.

There are six main ways the money could be found by Chancellor Philip Hammond at the Budget later this year:

1. Income tax: Adding a penny to the rate of income tax would raise £5billion a year

2. National Insurance: A 1 per cent hike to National Insurance contributions paid by workers, the self-employed and employers would net the Treasury about £9.9billion

3. Corporation tax: Labour has promised to unwind deep cuts to corporation tax introduced since 2010, bringing £18billion back to the Treasury

4. Personal Allowance: Freezing the personal allowance in 2020 – when it is due to be £12,500 – would raise £1.8billion. Cutting the basic rate allowance by £1,000 a year would raise £5.8billion.

5. Rich people: Separate research by former Tory minister David Willetts calls for a new inheritance tax system raises billions from the wealthy

6. Borrowing: If none of the above options are politically palatable or possible, the Chancellor can always borrow more money

One cabinet minister said: ‘The atmosphere was quite muted. Ministers could see the implications are going to make life quite difficult. Any sense that the taps are about to be turned on were dispelled.’

The prime minister, Mr Hammond and Treasury chief secretary Liz Truss are all said to have reiterated the message that the NHS boost was ‘extraordinary’ and would not ‘happen again’ in other areas.

Unveiling her big move on the health service yesterday, Mrs May said the service ‘reflects the values’ of Britain.

Signalling a drive to slash waste and red tape, she conceded that despite consistent above-inflation budget settlements the UK’s ‘crowning achievement’ was under threat from surging demand for treatment.

‘We cannot continue to put a sticking plaster on the NHS budget each year,’ she said.

‘So we will do more than simply give the NHS a one-off injection of cash.’

Mrs May said the funding that would no longer be sent to the EU would help fill the gap.

But she insisted the commitment she was making ‘goes beyond’ that and resources would be allocated ‘in a responsible way’ at the Autumn Budget.

Grilled by reporters, she conceded that people would have to pay a ‘bit more’ tax to support the funding splurge.

‘Across the nation, taxpayers will have to contribute a bit more in a fair and balanced way to support the NHS we all use,’ she said.

Outlining how the overhaul could be paid for, Carl Emmerson, deputy director of the Institute for Fiscal Studies, said: ‘If the Chancellor is taking his deficit target seriously, it would not be a surprise to see a £10 billion tax rise.

‘A tax rise of that magnitude would lead to many working families paying more.’

The respected body said raising National Insurance by 1p for workers and employers could pull in £8billion.

Almost £2billion more could be brought in by freezing the thresholds for the personal income tax allowance at the basic and higher rates – potentially dragging thousands more people deeper into the tax system.

The Prime Minister stopped to sign the leg cast of Jade Myers, 15, before delivering her speech on the NHS at the Royal Free Hospital in north London yesterday

The funding boost will still mean growth in NHS budgets is lower in real terms than under the Blair and Brown governments

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