Taxation: Healthcare Insurance

Lord Sassoon Excerpts

Thursday 9th June 2011 Lords Chamber

[Lord Flight]

To ask Her Majesty’s Government whether they will exclude the provision of healthcare insurance by an employer for an employee as a taxable benefit in kind.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Government have no plans to introduce a new tax exemption for private healthcare insurance where it is provided as a benefit in kind.

--- Later in debate ---

[Noble Lords]

Too long!

[Lord Sassoon]

My Lords, I am always happy to see evidence on any matter that could save the public purse considerable sums of money. The study has not been done but I am happy to look at any evidence that my noble friend has. However, I caution him that our general thrust is to get rid of reliefs and to simplify the tax system. That is why my right honourable friend the Chancellor announced the abolition of 43 reliefs in the recent Budget. The latest figures indicate that 2.3 million employees are still provided with private medical insurance by their employers. That would probably cover 4.3 million people in total, so the benefit is still widely offered.

[Baroness Farrington of Ribbleton]

My Lords, will the noble Lord the Minister, if his noble friend provides the additional information, have regard to the fact that, to my knowledge, no private healthcare system provides totally comprehensive cover? Will he bear in mind the anger that a consultant in an intensive care unit expressed to me at the fact that people coming in from the private sector for intensive care were blocking his beds? He accepted their right to do that, but people cannot opt out of the National Health Service, so the proposed measure would not necessarily save the money to which the Minister’s noble friend referred.

[Lord Sassoon]

My Lords, I am happy to confirm the position, which is quite clear and obviously will not change. As I say, we are not looking at this, but I never say no to ideas that would save considerable sums of money, however remote the possibility that the scheme would work. However, individual choice is the issue around private medical insurance. There is no plan to alter the role of private medical insurance in healthcare provision and there is no loss of entitlement to NHS care for those who take out private medical insurance.

[Lord Newby]

My Lords, leaving aside the financial implications of the Question asked by the noble Lord, Lord Flight, does the Minister agree that to move in that direction at this time would send completely the wrong signals? At a time when we should be supporting and strengthening the NHS, if the Government were in effect to encourage people who could afford it to have nothing to do with it, that would take us in exactly the wrong direction.

[Lord Sassoon]

I am grateful to my noble friend for allowing me to say again that we have absolutely no plans to introduce any such change to the benefit-in-kind rules or to the way in which private healthcare interrelates with the NHS.

[Lord Palmer]

My Lords, is that not a terrible shame? In order to ease the pressure on the National Health Service, would it not make sense, particularly for those who are self-employed, to allow their health insurance premiums to be offset against their income tax?

[Lord Sassoon]

As I have explained, to date I have seen no evidence that leads to that conclusion. The Treasury has done no detailed studies on the matter.

[Baroness Gardner of Parkes]

My Lords, is the Minister aware that the health reforms seek to ensure that the sort of situation that the noble Baroness, Lady Farrington, described, whereby the National Health Service has had to pick up all the failings of the private sector, will not happen again?

[Lord Sassoon]

My Lords, I can only repeat that there is no intention to change the relationship between private healthcare provision and entitlement to NHS care.

[Lord Hamilton of Epsom]

Can my noble friend clear my mind on this? If someone privately insures, whether they get tax relief or not, surely they remove a burden off the National Health Service.

[Lord Sassoon]

My Lords, they may to some extent at the margin remove a burden off the National Health Service, but, equally, under the previous arrangements where partial tax relief was given, there was considerable additional cost to the taxpayer. It is estimated that putting in place some new allowance would immediately cost the Exchequer at least £700 million—probably considerably more—because of the dead-weight effect of offering that relief to people who already have medical insurance.

[Baroness Whitaker]

My Lords, does it remove the burden on the National Health Service if it is the same surgeon who performs the treatment, whether private or public, because then the privately insured person jumps the National Health Service queue?

[Lord Sassoon]

My Lords, that was not the point that I was arguing at all. I stress again that there is no intention to change the existing relationship. We are not studying any plans to bring in a new benefit in kind in this area. These are all interesting points, and some are important, but I hope that the position is clear.