A FORMER top Treasury official has called for a new NHS and social care tax to help plug the gap in health service funding.

Lord Macpherson of Earl's Court told the Lords a 2 per cent tax would raise more than £10 billion a year and urged ministers to give it serious consideration.

He said the "squeeze" on NHS funding had gone on for too long and extra cash announced in the Chancellor's last Budget was "more a temporary sticking plaster solution than a permanent resolution" of the problem.

Lord Macpherson, former permanent secretary to the Treasury, said it was no longer realistic to cut spending on prisons, the police and defence to fund health and social care, adding: "Something has to give."

The independent crossbench peer said better management and reform was not going to be enough, and warned: "If we are to avoid future winter crises we need to address the funding side of the equation."

Lord Macpherson said providing extra funding through higher borrowing was not the right approach and structural spending needed to be financed by higher taxes.

Although going against Treasury "orthodoxy", a hypothecated NHS and social care tax should be set to fund additional pressures, based on National Insurance (NI) contributions and paid by those above retirement age as well as below.

"It should be charged on savings, rental and pensions income as well," he said. "Young people are already bearing too much of the burden of funding the elderly - it's time the old folk put something back."

Lord Macpherson said the new tax should be separately itemised on pay slips and only spent on the NHS and social care. A 2 per cent tax on incomes above the lower earnings limit of NI would raise well in excess of £10 billion a year.

Former head of the civil service Lord Kerslake backed the call for a hypothecated tax on income and wealth.

Lord Kerslake, who quit recently as chairman of a major NHS hospital trust, said "intolerable pressure" was being put on the system and the people who worked in it.

Bringing together health and social care was a good thing and would result in better services but not solve the funding gap.

"Money isn't always the answer but in this case it is inevitable and essential it happens," he said.

"We need an immediate cash injection to stabilise the system but we also need a royal or cross-party commission to look at the longer term."

Health and social care minister Lord O'Shaughnessy said extra funding had helped ease pressure on the NHS and provide extra winter beds but acknowledged preparations and investment had not fully mitigated enormous pressures on the service.

"In some cases that has led to unacceptable care being delivered," he told peers. The only sustainable solution was the integration of health and social care services, he added.

Lord O'Shaughnessy said NHS spending would continue to rise to meet demographic challenges.

Lord Macpherson had provided some "interesting and well considered" ideas but taxation was a matter for the Chancellor, he said.