Health and Social Care Levy (Repeal) Bill

Baroness Winterton of Doncaster Excerpts

2nd reading
Tuesday 11th October 2022 Commons Chamber

[James Cartlidge]

The new Prime Minister would rightly say that our manifesto said we would not increase national insurance, so she can draw on the mandate of the general election. We also seem to have vapourised our memory of the pandemic, but I would argue that it changed everything. The enormous borrowing accrued to this Government during the pandemic, which everyone supported—everyone wanted even more spending and even more support for businesses and individuals, as I remember because I was the then Chancellor’s PPS—made it exceptional, and we had to balance the books. I make it clear that this was not my preference, as I would not have wanted a levy to fund the NHS and social care. Given the politics of the time, it was the best way forward.

This is my personal view about how we should move forward. The key point is that the NHS is free at the point of delivery, which means we pay with time. When something is free, people wait and there are massive queues. Of course, those queues have been massively exacerbated by the pandemic, which is why the backlogs are so big, but it is blindingly obvious that the pressure on the NHS is overwhelming. There is almost infinite demand on finite capacity.

Labour Members will say in any election campaign, as we will. “We will do everything possible to increase capacity.” The Deputy Prime Minister and Health Secretary will, of course, do everything possible through her ABCD—ambulances, backlogs, care, doctors and dentists —strategy to improve outcomes in the NHS, but when we talk about funding the NHS, when we talk about the obligation to our grandchildren and the next generation, we have to be more radical, frankly.

In my view, we need a core NHS that is free at the point of delivery, but as a country we need to drive up the use of the independent sector and of private healthcare from all those brilliant companies that are seeing take-up shoot through the roof because of the backlogs. I know some of this territory is difficult to talk about, but I will give three key reasons why we should go down this route. First, every single person who pays to go private is freeing up space on the backlog. They are also boosting NHS capacity.

Secondly, this is standard in comparable countries. The Republic of Ireland, Australia and Germany have tax incentives for people to pay for their healthcare. There is an understanding that people who go to that trouble should have some kind of rebate, because they are doing everyone else a favour.

Thirdly, this is already happening. The post-Beveridge revolution is happening, and it is happening silently. There has been a massive surge in the number of people paying privately for healthcare. The Guardian recently published figures estimating that one in 10 adults in the UK has paid for private healthcare in the past 12 months, primarily because of the backlogs. Use has surged, according to the Independent Healthcare Providers Network. The number of people paying for hip replacements was up 193% in January to March 2022 compared with January to March 2019, and the number of people paying for knee replacements was up 173%. This is a huge surge in the number of people paying privately. It is true that many of them will not have wanted to do so, and I am not suggesting that they will have been delighted. Of course, we all want everyone to be able to use the NHS without long waits—that is clearly the ideal scenario—but it is not deliverable any more, not least with the demographic pressures we face.

We should look at the surging use of the independent sector and embrace it as a policy opportunity. Research from the Independent Healthcare Providers Network shows that 48% of people in this country will consider going private in the next 12 months because they know about the waits. This is about choice, and the most important thing is to have greater tax incentives for people to use the independent sector, so that people think about making a realistic choice. We should not settle for long waits for care any more. This is standard practice in comparable European and Australasian countries.

To be very specific, going back to the OBR document I mentioned, as a country we face a huge liability for health and social care. We should target increasing the percentage of our healthcare spend that goes to the independent sector so that we have a better balance, more like the balance in comparable European countries. If we did that, we would get much better outcomes, we would have more choice and we would finally have a 21st-century healthcare system with diversity of provision, which is the best way forward.

We should recognise that the revolution is happening, and it needs to happen with the Government’s backing and support.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson, Richard Thomson.

Health and Social Care Levy (Repeal) Bill

Baroness Winterton of Doncaster Excerpts

Committee stage
Tuesday 11th October 2022 Commons Chamber

[James Murray]

I beg to move, That the clause be read a Second time.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

With this it will be convenient to consider new clause 2—Assessment of revenue effects on health and social care of increases in the rates of taxes on dividend and capital gains income—

‘The Treasury must lay before the House of Commons within 30 days of the date on which this Act is passed an assessment of the merits of raising at least the same amount of revenue for health and social care as would have been raised by the health and social care levy by instead bringing the rates of taxation on dividends and capital gains income in line with existing rates of taxation of earnings.’

This new clause would require the Treasury to report on an alternative to using the health and social care levy to fund health and social care, by raising more tax revenue from dividends and capital gains.

Schedule stand part.

[James Murray]

We know that the Bill is straightforward in what it seeks to achieve: as clause 1 sets out, it simply repeals the Health and Social Care Levy Act 2021. Ministers are asking us today to overturn a piece of legislation that they and their colleagues strained to defend and voted in favour of a little over a year ago.

As I set out on Second Reading, we welcome Ministers scrapping the tax rise on working people introduced by last year’s Act, but while the levy was not due to come in until April 2023, and the Bill means that the levy will never be charged, the Act also raised national insurance contributions for the current financial year 2022-23 as a transitional measure. As clause 2 confirms, the Bill keeps national insurance contributions at that higher level for the first seven months of this year, before letting them return to their previous levels from November. The decision by Ministers to scrap the national insurance rise is, of course, better to have come late than never, but this in-year change means that yet another cost will be paid for through working people’s taxes, as public money pays to undo the mess created by the Tories having made the wrong call last year. The explanatory notes to the Bill confirm that there will be a cost of an in-year change. Under “Financial implications of the Bill”, they state:

“HMRC anticipates increased call volumes and customer contact as a result of the in-year reduction of NICs rates. There will be delivery costs in implementing this policy. IT changes will be required to be delivered at additional cost to HMRC, to support safe delivery of this policy.”

All this could have been avoided if Ministers had simply listened to people across the country, to the Opposition, to Members on their own side, to the Federation of Small Businesses, the British Chambers of Commerce, the CBI, the TUC and so many others. If Ministers had listened, they would have realised that it was wrong to go ahead with this tax rise on working people in the first place. While we know that the U-turn before us will cost more than if Ministers had made the right call last year, we do not have a figure from the explanatory notes for exactly how much this will cost. On that point, the Bill’s notes simply say that

“Costings will be set out in due course.”

In other times, I might have read that statement and concluded that Ministers genuinely do not know the costings, but if their behaviour over the OBR report is anything to go by, it could be that they are simply refusing to publish those costings for political reasons.

It is because of this Government’s lack of willingness to subject themselves to transparent scrutiny that we have tabled new clause 1. New clause 1 would require the Chancellor to publish a report on the financial implications of the Act on the day that it comes into force. That report must make an assessment of the Treasury’s plans to raise an amount of revenue equivalent to the proceeds of the levy in the context of its approach to general taxation and borrowing.

As I mentioned on Second Reading, the Economic Secretary to the Treasury confirmed in a letter sent to the shadow Chancellor and the shadow Secretary of State for Health and Social Care on 22 September that:

“The additional funding used to replace the expected revenue from the Levy will come from general taxation and may require further borrowing in the short-term.”

We already know that borrowing is set to soar thanks to the Government’s disastrous and discredited approach to the economy. We know that their approach has inflicted huge harm on our economy, damaged our international standing and pushed up mortgage payments for households across the country. We know in particular that the Government’s failure to publish the OBR report showing the detail behind their approach has aggravated the spooking effect on markets. Through our new clause, we would require the Government to explain how they will maintain the funding equivalent to the levy, given their wider reckless decisions on borrowing and the economy.

New clause 1 refers to general taxation. As Members may recall, when they announced the health and social care levy last year, the former Prime Minister and Chancellor explained that, alongside the national insurance increase, the Government would also increase taxes on income from dividends at the same time. On 7 September last year, the previous Prime Minister, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), said:

“because we are also increasing dividends tax rates, we will be asking better-off business owners and investors to make a fair contribution too.”—[Official Report, 7 September 2021; Vol. 700, c. 154.]

The question arises of why the current Prime Minister and Chancellor have decided to cut this tax rate from April 2023. They do not need to scrap the dividends tax rise as part of the repeal of the Health and Social Care Levy Act—the dividend rate does not appear in that Act—but they have none the less committed to doing so. I would be grateful if the Minister could set out whether he agrees with the former Prime Minister’s argument that having a higher tax rate on dividends means asking better-off people to make a fair contribution. If so, can he confirm why the Government have decided that it is the right time to cut taxes for those who are better off, even if that means greater borrowing funded by all taxpayers?

As I have made clear throughout, we are glad that the Government are using the Bill to finally scrap this tax rise on working people, but it is clear that taxpayers will pay yet again to fix the mess the Tories have created, that Ministers are planning to again cut taxes for those they have described as the better-off and that this Government are desperate to avoid scrutiny of their plans. It is with that final point in mind that we ask Conservative Members who are uncomfortable with their Government’s approach to join us in supporting new clause 1.

Our new clause would simply require the Treasury to be transparent about how it will replace the money for health and social care that will no longer accrue from the health and social care levy, in the context of its wider approach to taxation, borrowing and the economy. As we have heard throughout the day in Parliament, there is widespread concern that the Government’s plans do not add up and that their lack of transparency is making matters worse. Our new clause makes clear to Ministers that this must change.