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elderly people who will take advantage of the measure. The cost of a budget policy for someone between 60 and 69 would be £240 a year. That is a budget scheme and would vary with individual insurance companies. That £240 is before the deduction of the sum covered by the tax relief.

Mr. Dobson : Will the Minister give way?

Mr. Major : I am not keen to give way to the hon. Gentleman who has been chuntering like a clown throughout most of our proceedings.

Mr. Dobson : Only from a sedentary position.

Mr. Major : The hon. Gentleman is sometimes more funny than he is wise.

It is completely inaccurate and outdated to suppose that only high earners have private medical insurance, in precisely the same fashion that home ownership, largely thanks to Conservative policies, has long ceased to be the privilege of the few. About 5.5 million people--one in 10 of the population--are now covered by medical insurance, many of them through company schemes. Even trade unions are arranging group cover for their members, for, unlike the Opposition, they believe in the principle and practice of private medical health care and I have no doubt that their members, once retired, may wish to take out their own policies and benefit from the tax relief that is offered to them.

There is a further point. The type of insurance cover most generally marketed to older people, and which they are most likely to find attractive, is so-called "budget" cover. The very much lower premiums reflect retired people's priorities. For example, someone who has retired will be willing to have his non-acute operation at an off-peak time for the hospital at a lower cost. Tax relief will bring just that type of low-cost cover within reach of even more people than the 600,000 people over 60 already covered.

Mr. Dobson : Is it not true that a number of the so-called budget schemes make themselves cheap by giving pensioners a certain amount of money provided that they can find treatment at a National Health Service hospital within six weeks? How will that save money for the National Health Service?

Mr. Major : The hon. Gentleman overlooks the fact that cash schemes are not generally covered by the tax relief, but if there are any exceptions we shall look into them.

I recognise that some hon. Members may be opposed to any tax relief, not on the grounds advanced by the Opposition, but on general fiscal policy grounds, because it contradicts strict tax neutrality principles. It does. I agree with that and there is no point in not recognising it and acknowledging it, and I do so. But we have never pretended that it is our policy to remove all tax relief regardless of merits. Each is considered individually. My right hon. Friend the Chancellor made clear in 1984, when he introduced his first tax reform Budget, that he had no intention of removing all tax reliefs in the tax system. That is not our aim.

It is true that the general presumption is in favour of fiscal neutrality, but in practice there will always be room for some carefully-considered and limited tax incentives to meet particular needs. That is why we have introduced a number of reliefs, such as those for profit-related pay and

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personal equity plans, which are specifically designed to make the economy more flexible. The new relief that we are introducing for health insurance is fully justified on merit, as it is well directed at a particular problem, will increase take up and have wider benefits.

I referred earlier to the limited nature of the relief. I should make it clear that there are two restrictions on the relief apart from that imposed by the age of the insured person. First, the relief will be due only to people who are resident for tax purposes in the United Kingdom.

It is axiomatic that a tax relief should not be given to people who put themselves outside the scope of normal United Kingdom taxation. Furthermore, by and large, people who are not resident in the United Kingdom do not use the National Health Service on a regular basis ; thus, encouraging them to take out medical insurance would do little to relieve pressure on the NHS. They will not therefore qualify for relief.

Secondly, the clause provides for relief to be withdrawn in certain circumstances. That is where, for example, tax relief has been given when it was not properly due, or when it was given in respect of a contract that has ceased to be eligible for relief, perhaps because its terms have varied. In those circumstances, it is right that no further relief should be given and that any excessive relief should be paid back as speedily as possible.

I hope that hon. Members will now understand what caused us to bring this measure before the House and I hope too that they will appreciate that for many elderly people this new tax relief will be widely welcomed for a considerable period.

I understand the concerns of hon. Members about this relief, but I must say bluntly that I do not share them. This modest measure will give the double benefit of peace of mind to those who are able to take up private medical insurance as a result of it and an increase in flexibility in the provision of health care, which can only benefit the National Health Service and the community as a whole. Those are both desirable policy objectives, so I invite the Committee to reject the amendment and to support the principle enunciated in clause 1.

Mrs. Alice Mahon (Halifax) : I come to the debate with some experience in caring for the elderly in the National Health Service, because I spent 10 years of my life doing that. I also come to the debate with some trepidation. As with the elderly, every time the Government talk about improving the National Health Service, I feel some fear because in this debate, as in every other in which we see the Prime Minister's hand, we have to fight to preserve some part of that precious service. We have been in the battle of images versus the reality of the National Health Service since the Government came to office. The National Health Service is anathema to the Prime Minister. She hates it because it is a Socialist concept for which she has no time and it means caring for people collectively. I believe that it is a good and decent principle to want to care for the elderly.

I recognise the importance of this debate, and I do not under-estimate the dangers in the move towards tax relief for elderly people who take out private insurance. That will do nothing to help the vast needs of the elderly and I want to talk especially about the elderly in Calderdale. As my hon. Friend the Member for Dunfermline, East (Mr.

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Brown) said, the proposal has nothing to do with cost, because it is far more expensive to perform operations in the private sector and it has nothing to do with planning, in terms of surgeons' hours, nurses' time and the contribution of the Health Service workers. But the proposal has everything to do with the political will to get rid of the National Health Service or at least to weaken it seriously. In Calderdale, my local health district, there are 36,400 pensioners. I should add that Calderdale covers my constituency and the constituency of Calder Valley. There are 10,000 pensioner households ; one in four of all Calderdale households is a pensioner household. The number of over-75s in Calderdale increased by 16 per cent. between 1971 and 1981. We have the highest proportion of over-75s of any urban authority and the number of over-75s is expected to rise by one half in the next decade. You will appreciate, Mr. Hogg, why I am so concerned about what will happen to those many elderly people.

I obtained some of those figures from my local council and some from the Government. Over 5,000 of the 20,000 pensioner households receive some income support, so they are in the very lowest income bracket. Only about one third of all pensioners pay any tax. The national figure from the Government's 1986 general household survey showed that only 4 per cent. of people over 65 had private medical insurance. If that figure is applied to Calderdale, only approximately 400 pensioners out of 36,400, would benefit from the proposal. That gives us an idea of how few would benefit from the Government's tax relief.

The Chief Secretary has said that some people on low incomes, who are not in the tax bracket, will be able to purchase one of the budget schemes at about £250 a year. Again, we see the battle between image and reality. The Chief Secretary and the Government know that those people are struggling to make ends meet and that the last thing they are likely to do is pay £250 in health insurance--unless, of course, the Government are successful in frightening them into doing so.

5.15 pm

This tax relief measure will do little for the 36,400 pensioners in Calderdale district health authority. It will do nothing to help with the vital resources needed by the National Health Service. It will only help the private sector to leech off even more from the National Health Service than it is doing now. Already, the private sector is causing parts of the National Health Service to bleed to death. The Government's policy on care for the elderly is relevant to this debate and, in some ways, that policy has been rather sinister. Over the past 10 years, we have seen a massive shut-down of long-stay beds for the elderly and a huge increase in private beds for the elderly. Billions of pounds of taxpayers' money has been pushed into the private sector, and care for the elderly is deteriorating. We have seen the massive institutionalisation of elderly people. More and more elderly people have found themselves without adequate community care or caring relatives and have been forced into private homes. We have seen entrepreneur after entrepreneur jumping on to the granny gravy train as the Government encourage the waste of taxpayers' money.

I am deeply concerned about what will happen to the elderly who are frightened into taking out private health cover. What will happen when the insurance companies keep rewriting the small print, as they inevitably will if

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more elderly people take up the so-called "offer"? We shall see insurance companies redefining what is medical, as happens now when authorities seek excuses to close down long-stay beds. We are moving towards the conditions prevailing in the United States, where elderly people believe that they are going into hospital under private medical cover for acute operations but, as often happens with people over 75, that acute condition becomes chronic.

We shall see hospitals wanting to dump patients quickly whom they see as financial burdens. We shall have the dumping referred to in the excellent booklet by my hon. Friend the Member for Peckham (Ms. Harman), "Your dollars or your life". It should be compulsory reading for Opposition Members. Sixty per cent. of elderly people aged between 65 and 74 have long -standing illnesses. The image of them nipping into hospital, having a conveyor belt operation and nipping out again under a cheap private insurance scheme is nonsense. I have challenged the Minister on this subject, as only 400 of the elderly people in my health authority area are likely to derive any direct benefit from the proposal. To care for the elderly, the National Health Service needs a massive injection of cash. The £40 million that the proposal would cost would be a start, and if the Government could see their way to increasing that on a weekly basis for the next six months, we might see a return to properly funded health care.

If we are to help the elderly, we need to spend more on chiropody, physiotherapy, occupational therapy and intensive home care packages to keep elderly people in their own homes and to help them not to become chronically sick.

As my hon. Friend the Member for Dunfermline, East said so clearly, the measure will serve only to move us towards a more divided service for the elderly. It is being pushed upon an unwilling nation by a Prime Minister who is hellbent on getting rid of the National Health Service.

A warning was sounded last week in the Vale of Glamorgan, where the Labour party achieved an excellent result. I know that the Chief Secretary is an ambitious Minister and that, like many of his colleagues, he tries to curry favour with the Prime Minister because she is king-maker at the moment, but I warn the right hon. Gentleman that he will be sounding his own death knell if he proceeds with proposals that have nothing to do with helping the elderly and everything to do with destroying the National Health Service.

Sir Peter Hordern (Horsham) : I am not very happy about the clause, but before I give my reasons I want to say something about the speech made by the hon. Member for Dunfermline. East (Mr. Brown). The hon. Gentleman said that, under the clause, the queue would be subsidising the queue- jumper. I think that that encapsulates the Opposition's view of taxation. The hon. Gentleman and his party believe that resources belong to the state, not to the individual. Let me distance myself immediately from that attitude. Money does not belong to the state and tax relief does not mean giving money to those who are relieved of tax. It means taking less away. In a general sense, that is an important distinction.

The Labour party also suffers from the belief that if Governments take less away from people in tax, they make it less likely that they can increase public expenditure. As this Government's record has shown, however, if one reduces taxes in a general way, one so enhances the

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country's economic performance that one can increase revenue and so have more money available for public expenditure.

The Labour party believes that we have a static economy and that if we relieve someone of the burden of taxation, it means that there is less available for someone else. In fact, we have a dynamic economy, and our experience of the past 10 years amply proves that point. Everything that I have read about the Opposition's policy on taxation leads me to believe that it is more a policy of retribution than a means of raising revenue for public expenditure.

Mr. John Battle (Leeds, West) : It ought to be put on record that, taking into account indirect taxation, the people of this country have been taxed more heavily under this Government. It is a myth that the Government have given taxes back ; they have increased the burden of taxation.

The Temporary Chairman (Mr. Norman Hogg) : The hon. Member for Horsham (Sir P. Hordern) need not feel obliged to respond to that point in any detail if he does not wish to.

Sir Peter Hordern : I am grateful for your protection, Mr. Hogg. Doubtless I need it on other occasions but I do not on this occasion. It is true that indirect taxation has increased, but so has the country's wealth, which has meant that people are more able to bear the burden of taxation placed upon them. Moreover, rates of direct taxation have been substantially reduced. But I shall go no further, Mr. Hogg, because I want to restrict my remarks to the clause and the amendment.

We need as broad a base as possible for taxation. If we are to enjoy the benefits of reductions in taxation leading to dynamism in the economy and therefore to more revenue and more public expenditure, it is essential that there should be as few exemptions from the general level of taxation as possible.

Of course, we have some exemptions from taxation--some special allowances and tax concessions. We have had them for many years. However, I would distinguish those existing tax concessions from the one proposed in the Bill. We have tax concessions to encourage people to take out pensions, for example. That principle has been established for a long time. Some may say that we allow too many tax concessions for the pension industry, and I would number myself among them. We have tax concessions for the members of the property-owning democracy, although I do not think that the limit at which mortgage interest relief is allowed will be raised in future. It has not been raised for several years, so that concession is diminishing as a force, which encourages people in the belief that the Government genuinely think that there should be as little exemption to detract from reductions in direct taxation as possible. Other tax reliefs--for the business expansion scheme, for example--are designed to encourage more rented accommodation or more industry, and such reliefs also serve a national purpose.

The question arises whether the concession proposed in the Bill makes for the general good and whether it should have preference over others. No one has expressed the matter better than my right hon. Friend the Prime Minister. Some time ago she said that any tax concession for which extra public expenditure is required has to be set against the net income of a nurse. At that time the average

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nurse's salary was £140 a week, and tax and national insurance contributions amounted to £40 a week. My right hon. Friend said that that was important because any tax concession has to be set against the contribution that nurses make to national insurance and in taxation, and there are a great many nurses. That is a good test, and we should bear it in mind in considering the proposal.

We should look at the evidence to see whether we need to subsidise private medical insurance. I understand that, at the end of 1987, 5.2 million people, including dependants, were covered by private health insurance. There is a distinction between the categories of those covered : 28 per cent. of people in professional classes are medically insured as compared with 7 per cent. of the people at large. The question immediately arises what the deadweight cost of the proposal will be, as the people who are already covered are hardly likely to be encouraged to take out even more cover. More to the point, the cost to the Exchequer is substantially greater than it would have been had a completely new allowance been proposed. I understand that, overall, the population over the age of 65 is no longer growing. The principal demographic change is among the really elderly, and there is a substantial increase in the number of those aged 85 and above. The total number of subscribers to private health schemes has grown from 1 million in 1977 to 2.2 million in 1987, so the question arises whether the concession is necessary to encourage people to join private health schemes.

For that reason it is necessary to ask those who conduct the schemes what they believe is the position. I shall quote from an article by Barbara Miller that appeared in The Guardian on 12 October 1988, which was, of course, before the Health Service proposals were published. It said :

"BUPA, the largest British private health insurance company with 61.7 per cent. share of the market, does not want any major government intervention to help boost the private sector. We are not predicting, or expecting, any bouquets from the Prime Minister's review,' says Neil Jamieson of BUPA. We want to stand on our own feet and not be supported by measures taken by the Government We feel very uncomfortable with many of the ideas that have been put forward We do not believe they are in the broad interests of the British public'."

It is important to note that BUPA, the largest private health insurer, sees no need to give extra concessions or help to the private health sector.

5.30 pm

I accept entirely, as my right hon. Friend said, that those who do not pay taxation will, nevertheless, gain the advantage of a net reduction of the cost of medical insurance. However, does that total reduction overcome the amount required to compensate for the deadweight for existing subscribers? I do not know the calculations, but I believe that the cost of the concession will be some £40 million. I would guess that in the first year most of it will go to those who are already covered by existing schemes. If, however, the scheme becomes more popular, as the Government hope, it will cost much more than £40 million. Then, following the analogy of my right hon. Friend the Prime Minister, we must ask whether that is the best way to use the tax that a nurse pays.

I believe that the top rate of tax of 40 per cent. is a significant achievement and is a credit to my right hon. Friends. However, it necessarily means that those people

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who now pay a top rate of 40 per cent. are not on the bread line. The whole emphasis of our reforms is that we should stand on our own feet, yet the clause proposes that those already on private health schemes should be helped a little more. Of course, the point could be made that medical treatment is much more expensive for the elderly, but that is a problem that we all face. When the top rate of tax is only 40 per cent., it appears unnecessary to give extra assistance to people joining private health schemes.

Private health schemes are already making considerable progress. I have already mentioned the increased number of people covered by them. I understand that some company schemes already look after their pensioners and that more are proposing to do so, as I believe any good company scheme would aim to do. I wonder why it is necessary to have such an additional incentive when there is a natural trend towards the growth of private health insurance schemes and of company schemes assuming a responsibility for their pensioners.

I would be more prepared to accept the clause if it gave tax relief only to the elderly. Has my right hon. Friend not noticed how many elderly people now retiring have pretty good occupational pension schemes and are very well covered? Of course, by the time they retire, they have probably paid off their mortgage and they could, perhaps, do with a tax concession for their extra needs as elderly people. I can see some force in that argument. However, I cannot see any force in the argument that their children, who may be high salary earners and paying tax at only 40 per cent, should be given maximum tax relief on something that they could well afford to pay for their parents in any event. We must think carefully before we say that it is necessary to give to such a large extent a partial relief for private health schemes to those who could well afford to and jolly well should look after their parents.

Mr. D. N. Campbell-Savours (Workington) : Will the hon. Gentleman press the Financial Secretary about the deadweight of those already in schemes, who, on the implementation of the Finance Bill, will be beneficiaries? Will the hon. Gentleman press the Financial Secretary to give the proportion of the relief and the projected relief that will be given to such people?

Sir Peter Hordern : I have no doubt that my right hon. Friend will wish to deal with that point, because I have already raised it with him, but I am grateful to the hon. Gentleman.

I understand that the Government have claimed that the relief would help to ease the problems in the National Health Service. Indeed, my right hon. Friend the Financial Secretary made the point on the Second Reading of the Finance Bill that there would be savings--to some extent to a geared degree --because a small relief would allow significantly less expenditure to be made in the National Health Service. I accept my right hon. Friend's point and the spirit in which he made it. However, if that is correct, we should be thinking of carrying that principle a little further, not just by means of a tax concession, but, if it is as good as that, we should be paying people the marginal rate to opt out of the Health Service. I do not believe that that is a good idea and nor is it a good argument. If we are concerned about finding the best way to help the National Health Service, I suggest to my right hon. Friend that we ask my right hon. and learned Friend the Secretary of State for Health. I have noticed that my right

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hon and learned Friend the Secretary of State for Health must come to the House every year--sometimes in the face of great difficulties, which are sometimes caused by my right hon. and hon. Friends--to justify increases in health charges. I have always supported my right hon. and learned Friend when he comes to the House because the poorest are exempt from those charges. The aim of the charges is to raise some direct payment from those who can afford to pay. However, the essence of this relief is that, while there should be some small relief for those who do not pay tax, the largest element of relief will go to those on very high earnings. Therefore, we have a complete contrast between the position of my right hon. and learned Friend the Secretary of State for Health when he comes to the House concerning health charges and that of the proposal in the clause, which will give substantial relief to those who can well afford to make the arrangements in any event.

If the aim of the clause is to ease the burden on the National Health Service, it would be best left to my right hon. and learned Friend the Secretary of State for Health to decide how the money might be used. We must also bear in mind that tax concessions make people think that there is some virtue in opting out of the National Health Service, which is a view I do not share. If we persist in that view, it is the surest way to cause people to regard the Health Service as some form of second-rate service. I do not believe that that is wise or accurate.

If it is right to have tax concessions for health, there is a short distance to go before we shall be asked for tax concessions for education in the form, for example, of private education vouchers. That is something with which I would not agree. Unfortunately, we have got ourselves on a slippery slope and I for one am not prepared to go down it.

Mr. Peter L. Pike (Burnley) : The hon. Member for Horsham (Sir P. Hordern) made some valid points in his contribution to this important debate. Although I do not intend to follow his line, he pursued well thought-out and important principles. At the end of his speech he said that he feared that the moves in the Finance Bill, and especially in clause 51, could set a dangerous precedent. I know that when the Minister speaks later in the debate he will deny that and say that the Government have no intention of moving in that direction in regard to health, education or similar areas. However, many people know that once the Government have started to move in a certain direction, subsequent years see further moves. Therefore, it is absolutely right that we should be concerned and somewhat fearful about the direction in which the Government intend to go. I support amendment No. 5, moved by my hon. Friend the Member for Dunfermline, East (Mr. Brown), which delays the implementation of the provisions of this clause until 1993. The clear intention is that the provisions will be the subject of debate in a general election and that after being elected the Labour Government will say that we do not believe that that is the direction that we should take. In the first part of my speech I shall say why I disagree with the principles of the clause and I shall then turn my attention to the ways in which the money that we are discussing could be more widely used by the Government in the intervening three years from 1990 to 1993.

The Minister referred to £40 million, but he cannot be absolutely certain about the figure. Although I understand

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the reasons why he canot be certain, that makes this provision even more of an open cheque or an open encouragement. Some sons and daughters will, of course, take out health insurance for their elderly parents or for other people in their family, but not knowing exactly what figure we are talking about is dangerous.

If this proposal goes through and the Government do not heed the warnings, I accept that the right principle on which the provision should be carried out is on a MIRAS-type basis, which would benefit those pensioners who do not pay tax. However, I remind the Chief Secretary that the MIRAS principle was an extension of the option mortgage scheme that was originally introduced by the 1964-66 Labour Government to extend the tax concession that was then not available to people not paying tax to those at the lower end of the income scale. That welcome move ultimately developed into the MIRAS scheme as it now exists. If the provisions have to go through, such an underlying principle would be absolutely essential.

The clause would give assistance to those people who least need it. Ultimately, it is the pensioners or the relatives of the pensioners with the highest incomes, especially those paying tax at the highest rate, who will get the biggest benefit from this proposal. I am always amazed that the Government continually give any money or cash that is available to those who least need it and to the people who have most to start with. As evidence of that one need only look back to 1979, to the Government's first Finance Bill after the general election, when they reduced the standard rate of tax by only a small amount, but in effect gave a substantial amount to the people paying the higher rates of taxation. That trend has been evident in every Budget since.

Upratings of pensions now take place in April--at almost exactly the same time as the Government produce their Budget. As that is so close to the Budget, people on benefit and at the poorest end of the income scale are justified in relating what is being given in the Budget to those who least need help to what they are receiving in their benefit increases.

5.45 pm

If the Minister really wanted to introduce a provision to help the elderly, instead of going ahead with this proposal, which is of benefit to some but not to those who most need it, it would be far better to give something to those 200,000 pensioners who received no increase in the April uprating and to the 300,000 who received only a partial increase. Some of the pensioners at the bottom of the scale will not receive any increase in their pension in next year's uprating. The Chief Secretary fully understands the reason for that. The pensioners who were on supplementary benefit before the major changes in the social security system in April 1988 then went on to income support and were not entitled to as much in income support as they had received under supplementary benefit because the new system is far meaner and far tighter. Many people lost a lot and, although certain people were given protected payments, those protected payments were to be eroded against any future increase. Therefore, next April for another year in succession, some people will not receive any increase in the amount of money that they receive from the state in their benefit payments. They will realise that at the same time the Government are giving at least

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£40 million in possible tax concessions to those people who are able to take out private health insurance. I am sure that people on benefit will feel that that is not right.

I do not intend to go too far along this line because on Thursday of this week we shall be having a major debate on the National Health Service review. I am sure that many, if not most, of our pensioners would prefer to see the Government move in a much more positive direction over the National Health Service instead of adopting the nonsensical and destructive approach of the review of which many people are rightly fearful. I know that hon. Members of all parties have been inundated with mail on this subject, especially from elderly people who fear an erosion of the Health Service. One thing about which such people will be most fearful is that provisions to encourage private health treatment represent a split and a division in the Health Service and give a better opportunity for treatment to those who are able to pay. The hon. Member for Horsham said that he did not believe that the Health Service was second-rate. I know that he fully believes that and that he will be one of those who will fight to ensure that the National Health Service always maintains its status in terms of the type of treatment that it can give.

However, we must recognise that, whatever the clause provides in the future, the majority of elderly people will still depend on the National Health Service for their treatment and they are rightly concerned about what is happening. To some degree, this proposal, running along-side the National Health Service review as it does, proves our point that the Government are determined to break up and to destroy the principles of a National Health Service that is based on need and not the ability to pay. That is worrying.

The district health authority in my area is proposing to close yet another hospital. It will be the third in the past three years. Hartley hospital and Victoria hospital have already been closed and the district health authority is now proposing to close Bank Hall hospital for the care of the elderly. Although the health authority has not published its consultation document, admissions have already been stopped. That means that by the time the consultation exercise, which must be carried out, is completed, we will be faced with a fait accompli. Yet even now we have insufficient accommodation for elderly people in the National Health Service within our district. We know the detail of the consultation and we know that it will show that in future there will be less provision for the elderly and for those who need to remain in hospital care. The proposal will not help. I have raised the following matter in Health Service debates and it ties in with the question of taxation. I wonder why people who pay for private treatment, who are not necessarily covered by insurance, often have to pay in cash. It is extremely common in my constituency for patients to be asked to pay cash. That is not because the people running the private hospitals think that the chance of the patient's recovery is not good and that, therefore, they will not otherwise receive the money. The reason is that the full amount paid is not shown and, therefore, tax is not paid on it. The Minister might well look at that issue rather than pursue the policies outlined in clause 51.

One of my constituents recently paid £1,000 cash for a cataract operation. He went against his principles but his

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wife was elderly and he was more worried about her and, in the end, he paid cash. He was asked to go to the hospital with not a cheque or banker's draft but cash.

The proposal is wrong. It will help only those who, in the main, can secure private treatment. If people have the money and the choice is there, it is their right to exercise that choice. However, it is not for the Government to give a tax concession to encourage more and more people to do so. They should put that money into the Health Service and tell the Secretary of State for Health that money is available to be spent in that way.

If the Government are successful in carrying the clause, they will give away at least £40 million. If they are prepared to do that, I can make some useful suggestions as to how they could put the money to better use. They could put it into the Health Service, which is important. The problem in the Health Service is not how it is run but the lack of resources, which could be made available. If the water industry were to remain in the public sector, the problem would be not who owned it, but the lack of money made available by a Government who have the resources to invest in it. They cannot keep talking about what happened pre-1979 because they have been in office for 10 years and must accept responsibility for what has happened. My own authority receives less money for housing from the Government than it did prior to 1979. Therefore, the improvements to old council houses have slowed down and, despite the community refurbishment schemes and the extra little schemes of which the Government are so fond, the authority still receives considerably less money from the Government. One programme that we designed to improve the pre-war council houses should be coming to completion now, but it will have to run for at least another 10 years because the resources are not available.

The Opposition tend to get abused by people who say that our main concern is public sector housing. That is not true. We are just as concerned about problems in the private sector. There as a bonanza of grants up to 1983 but, having won the election in October, the Government announced a cutback. Money could be made available for grants and the improvement of older housing in certain parts of the country. When people apply for repair and improvement grants, they never obtain them because the councils never receive the cash from the Government. I know that my hon. Friend the Member for Halifax (Mrs. Mahon) has experienced the same difficulty with older terraced houses on her side of the Pennines. Such houses could be improved because they are basically good houses, yet councils are unable to provide the money for doing so.

My own local authority has had to target just three areas--Leyland road, Hart street and Eliza street--because it could not deal with the borough as a whole. It had to stop repair and improvement grant applications in March 1984. Therefore, it will never be able to meet the demands of a mass of people who are in the pipeline. The Government have thrown an extra £200,000 into private sector area renewal schemes, but that is chickenfeed. If the amendment were to succeed, part of the £40 million could go towards housing problems. The HIP allocation in Burnley was £2,250,000 for 1989-90 and it has received a few additional payments on top of that, but the projected programme needed an expenditure of £11,075,000 to deal with the problems.

Lancashire county council faces a problem with schools. We have chased the Government year after year.

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They could give a bigger allocation for schools in 1990 because they are prepared to give this tax concession from April next year. Instead of giving that tax concession, they could give the money to local authorities to spend on schools. I have had to battle for several years for schools to be included in the programme because the council has received only a fraction of money that it has sought from the Government to bring the schools up to standard. The standard of school building affects the education of the children.

Even though some schools are now included in the programme, problems still exist at Walshaw high school, Briercliffe primary school, Casterton Avenue primary school, Rosehill infants school, Gawthorpe high school, which needs an additional science laboratory, and Barden high school, which needs a home economics unit. It would be far better for the Government to spend money on those schools than to assist pensioners who do not really need help and who should be able to receive the treatment that they need. We want them to have the finest treatment from the NHS because they are entitled to that. We are still awaiting the Government's response on the important issue of community care--

The Temporary Chairman : Order. What the hon. Gentleman says is immensely interesting, but it is important that he confines his remarks to the amendment that we are debating.

Mr. Pike : I was explaining how the Government could use the £40 million if they were prepared to accept the amendment. I am always helpful to the Government and would not wish them to be embarrassed if the amendment were carried tonight and they did not know what to do with the £40 million next year. I have been extremely helpful to them in that respect. However, I recognise and understand the constraints upon us. I could have made the same argument about the roads in Lancashire.

I shall return to the principle involved in the clause, which is leading us in the wrong direction. We want our elderly people to receive care under the National Health Service. We therefore believe that the Government should not give tax incentives to take people out of the NHS. They want to do that only because they are determined to cut the NHS and want to put a foot in the door and drag it down. That is the basic and fundamental reason why this proposal is contained within the Finance Bill.

Clause 51 is not designed to help the pensioners, although a few will benefit. It is designed to make another chip in the Health Service because the Government recognise that the one last remnant that shows that Socialism can work in this country that they have failed to destroy is the National Health Service. I hope that when it comes to the vote, hon. Members will recognise that the clause is nonsensical and that the amendment should be carried. The clause should be deferred for three years.

If the Government believe that they are right, let them test their opinion at the next general election. Let the people decide. The proposal was not in the Government's manifesto. If they receive a mandate at the next election--I am increasingly convinced that they will not--let them then implement the proposal. The Government should accept the amendment and put the idea to the people of the country.

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6 pm

Mr. Quentin Davies (Stamford and Spalding) : The matters before us are of considerable importance. I listened with great attention to the arguments of the hon. Member for Dunfermline, East (Mr. Brown), but I was conscious of growing surprise. He is an experienced Member and passes in some quarters as an expert in financial and fiscal matters. The drift of his argument seemed to be that there was complete equivalence between a Government allocation and a tax relief--between a Government decision to increase its Budget in favour of a particular purpose or actively and laying aside a sum that would be forgone in the form of a tax relief to benefit the same activity or purpose.

The hon. Member for Dunfermline, East appeared wholly ignorant of--or pretended to be ignorant of--one of the cardinal principles of fiscal policy : the gearing effect of tax relief. If the Government decide to increase the allocation to a particular activity by £1 million, the incremental resources directed to that activity are £1 million. If the Government decide to forgo £1 million in tax revenue by establishing a tax relief for that activity, and if the taxpayers who benefit from that relief pay tax at a marginal rate of, say, 40 per cent., the incremental resources that will flow to that activity will be £2,500,000--a substantial difference.

Dr. Moonie : The money will be paid to the insurance companies, not to the individuals. It has nothing to do with a tax

allowance--although people will pay less out of their own pockets, so the hon. Gentleman's argument is spurious. Government money through the MIRAS scheme will be paid directly to insurance companies such as BUPA, not to the people concerned, so it does come out of taxation.

Mr. Davies : That makes no difference. The point is that a tax relief is established which creates an inducement for people to spend more money than they otherwise would on purchasing particular goods or services. The particular mechanism whereby they purchase, and the intermediaries who may be involved in the purchase, do not matter. They are entirely immaterial to the economic or fiscal arguments involved. So I must reject the hon. Gentleman's intervention. I return to the important question whether the hon. Member for Dunfermline, East was as ignorant as he pretended to be of the cardinal principle of fiscal policy to which I have referred--the gearing effect of tax reliefs. We discovered the answer to that question during his speech. My hon. Friend the Member for Gillingham (Mr. Couchman) reminded the hon. Gentleman of this principle. Then the hon. Member for Dunfermline, East made another extraordinary statement. He said that in this case the administrative costs of BUPA or PPP or the Provident or other health insurers will more than take up the additional resources that the gearing effect will generate. So the gearing effect will be discounted or compensated for or negated by the high level of administrative costs.

Again, I ask myself whether the hon. Gentleman really believed what he was saying, and whether he expected the rest of the Committee to believe it. Does he really believe that the administrative costs of BUPA and PPP are 40 per cent. of their turnover? We had an interesting opportunity to discover the answer later in the hon. Gentleman's

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speech, when he mentioned the administrative costs that these health insurers generate--10 per cent. So the hon. Gentleman did not believe a word of his own argument.

I greatly resent and regret what the hon. Gentleman offered us today ; it was an exercise in deliberately cynical disingenuousness and predetermined humbug.

The story does no stop there. The contradictions in the hon. Gentleman's speech went on and on. I am not in a position to say with certainty whether they were deliberately disingenuous or involuntary. Being an easygoing sort of person, well prepared to give colleagues the benefit of the doubt, I am perfectly prepared to believe that these other contradictions, unlike the one to which I have referred, were merely the reflection of weakness of reasoning or confusion of mind--

Ms. Diane Abbott (Hackney, North and Stoke Newington) rose-- Mr. Dennis Turner (Wolverhampton, South-East) rose

Mr. Davies : Perhaps it might be useful to consider one or two of the other glaring contradictions in the speech of the hon. Member for Dunfermline, East. He complained at one point that the tax offset that the Government propose in clause 51 was not capped. A few moments later he complained that this tax relief would generate no material savings for the NHS. He cannot possibly have it both ways. By definition, to the extent to which the utilisation of this tax relief is capped, the benefits and savings to the NHS will be reduced.

The hon. Gentleman complained vigorously about the deadweight. If this tax relief were not used to any great extent by new people subscribing to private health insurance, the deadweight cost would remain a relatively high, possibly a very high, proportion of the total cost of the relief that the Government are proposing. However, to the extent that the take-up is greater, the deadweight costs will fall as a proportion until they may become minimal, negligible or altogether non-existent. So the argument is untenable.

I am flabbergasted that an experienced Member such as the hon. Member for Dunfermline, East should attempt to argue in the course of the same speech that a relief should be capped and then complain about the deadweight cost.

The hon. Gentleman has done a great disservice to the Committee, and I am sorry that such an unfortunate example of a parliamentary speech should have begun the Labour party's contribution to its proceedings. I hope that the hon. Gentleman will think long and hard about his speech this afternoon and decide in the interests of the dignity and credibility of his party--if in no higher interests--that he will at least display slightly more respect for his audience inside the House and beyond it as the deliberations of the Committee continue. If he feels in need of it, he should without delay arrange to take a crash course in elementary logic.

Mr. Denzil Davies : I need not comment on the speech of the hon. Member for Stamford and Spalding (Mr. Davies) because, frankly, most of my hon. Friends--and I suspect many of his hon. Friends--found it incomprehensible.

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Amendment No. 5, which we are discussing, is linked with No. 8, which I tabled. Mine is a technical amendment on which I will not dwell. However, I must, for the record, point out that it should read :

"Clause 51, page 39, line 45, leave out from claim' to deducted' in line 46 and insert set off against its profits liable to tax on the amount' "

rather than just "tax the amount". It was obviously a printer's error.

My hon. Friends and I, and some Conservative Members, oppose the clause for two reasons. First, we do not accept that this is the best way to spend £40 million, or whatever the sum might be. We appreciate that it is a figure that the Treasury or Inland Revenue has plucked out of the air. It is difficult to estimate sums of this kind because the ultimate figure will depend on the demand and what happens after 1990. Indeed, it could end up being £200 million. As the hon. Member for Horsham (Sir P. Hordern) said, if £40 million is available, it had better come out of the DHSS rather than out of the Inland Revenue and the Treasury for the NHS.

On Saturday I was in my local advice centre, as many other hon. Members must have been in theirs. I discovered that the waiting time to see a consultant dermatologist in the Llanelli area is two years from the time of referral by a local GP. That is due to the shortage of appointments of consultants in dermatology, which is to some extent a Cinderella service.

My hon. Friend the Member for Dunfermline, East (Mr. Brown) said that £40 million would pay for 1,000 consultants. In my constituency I need just one extra consultant in dermatology. That would be of far more benefit to the NHS in my constituency than the amount of money that will come back to those of my constituents who can afford to take up this so-called tax relief.

My constituents must wait three years for a hip replacement operation. In other words, in my constituency I need two more orthopaedic surgeons. That would be of more benefit to the NHS and the elderly in my area than what is proposed in the clause. We know why the Government are taking this action. The Prime Minister wants a two-tier health service. She does not believe in the NHS. She could not get her way entirely with the changes that she wanted to make, so she rushed off to the tax system. I admit that Governments of both parties have sometimes rushed to the tax system when they have been unable to solve their problems and get their way by some other means.

The second reason why Labour Members, and some Conservative Members, especially the hon. Member for Horsham, oppose the clause is that we believe that the tax system should not be used for what was once described as social engineering. We used to hear speeches from Conservative Members-- not from the present Chief Secretary ; he was not around in those days-- including the present Chancellor of the Exchequer and the Financial Secretary, about the evils of social engineering. Of course, they were in opposition at the time. Certainly Governments are not supposed to use the tax system to advance a philosophy or ideology. The tax system is supposed to be neutral and to raise money for the Government. Governments must achieve their aims by other means--by changing structures rather than by using the tax system.

Conservative Administrations have been involved in more social engineering than have most Labour

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