House of Commons Hansard Debates for 9 May 1989

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Governments since the war. I well remember the enterprise zone concept introduced by the former Chancellor of the Exchequer, now the Foreign Secretary. That was a bit of social engineering, and it has not worked. The Chancellor needs to encourage savings, and social engineering includes, for example, PEP schemes and unit trusts and the tax reliefs that are given to people to invest in schemes of that kind.

There are many other examples of social engineering. We are debating one such piece of social engineering now ; the Government are trying to achieve something in which they believe ideologically and they are trying to achieve it through the tax system.

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What the Government propose is all dressed up as a contract of insurance, but as I read the legislation, if an elderly person wishes to have one operation--my hon. Friend the Member for Burnley (Mr. Pike) referred to a cataract operation--presumably it will be necessary for that person simply to take a sum of money to an insurance company, buy what is called a premium and then get the operation that is required.

That is a veneer. The Government are giving tax relief to buy services with money, although they are talking about health or medical insurance. It seems that it will be possible to make one payment, for one premium, and exchange that for a contract, and presumably after the one operation has been achieved, that will be the end of that piece of medical insurance. That is my understanding of how it will work. That is buying services and getting tax relief for the purchase. That is the wrong way to use the tax system. It is also dangerous because it could lead to all manner of other pieces of social engineering.

The hon. Member for Horsham made the fair point that, with a top tax rate of 40 per cent. and a basic rate of 25 per cent., there is no justification for tax breaks or tax reliefs. The Government take much of their radical Right philosophy from the United States, from the Reagan followers. In fairness to President Reagan, he took a Bill through Congress under which he reduced the top rates of tax and wiped out most of the tax breaks and tax allowances.

The Prime Minister likes to follow the American system, but she cannot bring herself not to use the tax system for ideological purposes. The logic of her philosophy would have been not to have tax reliefs. Then the Government could have reduced the top tax rates to 40 per cent. That would have made sense. Mortgage interest relief is another example of that. To try to have it both ways--a lower rate of tax plus the reliefs that they propose, which go to those who pay at the top rates--represents an unfair, unjust and unnecessary use of the tax system.

In connection with the somewhat esoteric amendment that I tabled, which has not been selected, I understand that most organisations such as BUPA and PPP are taxed as provident associations. I gather that they are not charities. I do not know whether they pay tax, and perhaps the Minister will say if they do. I appreciate that he is not permitted to go to the Inland Revenue and examine people's tax affairs, but presumably organisations such as BUPA publish accounts. My amendment was designed to ask whether, if such organisations do not pay tax, they can still claim back the tax which has been deducted in the MIRAS scheme.

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Presumably they can. That is unusual, since if they have no profits on which they pay tax, they are like charities ; they simply claim a subsidy from the Treasury. So it is nothing but a subsidy. My understanding of the tax system is that normally the Revenue pays tax back--if, of course, one is paying tax on one's profits. But if one is not paying tax on one's profits, there is no real case in tax logic to reclaim the tax. If I am right, then this is a clear and straight subsidy, and there is no justification for it.

The clause goes on to deal with qualifying individuals and insurance companies. My reading of the provision leads me to believe that a company doing business in the EEC would be a qualifying insurer for this purpose. The company does not even have to be resident in the United Kingdom, or even to trade here. Does that mean that, if an elderly person takes out a contract of insurance with a German medical insurance company, the Inland Revenue will send a chunk of money to Germany? Presumably the same would apply to a company in France or in any other EEC country.

May we be told whether that is the case and, if so, why it is necessary? It appears to have been necessary to include a provision to apply the provision not only to insurers in Britain but to insurers in the EEC as well. I would not have thought that there was a Community directive to that effect. Do I gather from the look of amusement on the Minister's face that there is such a directive? Are the hands of the Government tied in the matter? In other words, we are not talking about £40 million going to the British health system, as Ministers like to call it ; it seems that much of it will go across the exchanges to other countries.

It is extraordinary that a business operating in Europe, paying no tax in Britain, should receive a tax subvention from the Inland Revenue. I take it that that is what will happen from the way in which the Financial Secretary was half-smiling in anticipation of that question.

Clause 51 is unnecessary. It will hinder, not help, the NHS. A little of the £40 million that is available could be spent on providing more consultants. That would not be inflationary. It would not hurt the balance of payments more than it is hurt already. It would not lead to a surge of imports. As the hon. Member for Horsham said, that money should be spent on the NHS through the DSS, the Welsh Office and the Scottish Office, so that once again we can make our Health Service the best in the world.

Mr. Matthew Carrington (Fulham) : Tax breaks are always hard to justify. It is difficult to introduce more tax concessions into our tax system and to maintain the essential elements of a fair, just and equitable taxation system. However, the introduction of tax relief on medical insurance is a small change. It can be justified because it removes an injustice presently experienced by those who, on retirement, find themselves cast out of insurance schemes because they can no longer afford them. This is a minor measure, but it rights a wrong. Like other tax concesssions, it brings greater justice into our fiscal system.

As private medical insurance expands, more and more people receive the benefit of such insurance from their companies. Often, they are not highly paid and so will not benefit from a large pension. When such people leave their employment they find that the benefits that went with it cease. Those who once enjoyed the benefits of private medical insurance will find those benefits withdrawn.

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Ms. Abbott : The hon. Gentleman talks about private health insurance being withdrawn from the over-60s as though that were an act of God. Is it not the case that private insurers withdraw such insurance from elderly people because there are no profits to be made from it? If the hon. Gentleman is worried about justice, he should be writing to those private insurers. Is it not the nature of a system run for profit that the elderly will not be covered?

Mr. Carrington : The elderly frequently are covered. That is exactly the point.

Ms. Abbott : One per cent.

Mr. Carrington : Private insurance companies will frequently continue cover provided payments are made by the person insured. As long as the cover is continuous, elderly people find it perfectly possible to obtain cover and are encouraged to do so by many private insurance companies. The problem comes when there is a break in that cover because, at the point of retirement, they can no longer afford to pay the premium. That is the problem that clause 51 is trying to address.

Another good justification for giving such a tax concession is that it seeks to ensure that private medical insurers can afford to address the problem of the elderly. They do that by building up the number of elderly people with medical insurance to a point at which it becomes self- sustaining because the number of people benefiting from it justifies the effort being made by the insurance companies to provide cover.

Clause 51 is justifiable and highly beneficial. The amount of money involved is small ; £40 million is about one tenth of 1 per cent. of the annual expenditure on the Health Service and is only a small proportion of Britain's annual health budget. Consequently, the cost to the Exchequer is small compared with the total amount paid out by taxpayers in providing medical cover for the nation.

An additional benefit is that this measure will encourage the growth of private medical care. People will realise that by joining such schemes or by encouraging their employers to join such schemes, they will be able to obtain cover throughout their lives and not simply up to retirement. As more people are encouraged to join such schemes so more employers will be encouraged to provide them. The growth of private medical cover is beneficial to the whole of society, not just to those who obtain it. It is good for a number of reasons. To start with, it provides choice. People who wish to have such choice, or who work for employers who wish to provide them with that choice, will be able to say where they want to obtain their medical treatment. That introduces competition which benefits the NHS as well as the private sector.

Many changes in the NHS in the attitude towards patients and the way in which they benefit from hotel-type services--we see this particularly in London hospitals--are a reflection of the much higher quality of care provided by private hospitals. Our NHS hospitals have recognised that they must match that service in order to meet the requirements of the patients.

Mr. Turner : Will the hon. Gentleman answer one simple question? How would the hon. Gentleman's analysis about patient choice, freedom and opportunity affect a person knocked down in the road tonight or a person suffering from a more common ailment such as

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appendicitis? Would not such people simply ask to be taken to a hospital to have their needs attended to? Is not all this an aberration

The Temporary Chairman : Order. The hon. Gentleman's intervention is becoming a little lengthy.

Mr. Turner : I shall bring it to a conclusion, Mr. Hogg. Thank you for your forbearance.

Should we not be working to build a Health Service for all, irrespective of means, so that all have the choice of good medicine and service wherever they are?

Mr. Carrington : The competition created by the private medical sector has been important in changing what happens to such a person when he or she arrives at hospital. In the past, hospital waiting areas were dingy and over-crowded, not, to use the current jargon of the Health Service, user-friendly.

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What is now happening is that our major hospitals in London are changing the patient areas inside the hospitals to bring them more up to the standards regarded as usual in the private sector. That has been a reaction to the standards which have been shown to be perfectly possible and affordable within the private sector. It just took the extra effort and the private competition for the National Health Service to do the same. I believe that competition does nothing but good for the whole level of health care across the country and that the encouragement of that standard of health care is to everybody's advantage.

One point that is very important and seems to get lost quite frequently in the discussion of private medical insurance is that private medical insurance cannot, is not, and never will be in the foreseeable future a substitute for the National Health Service. It does not pretend to be and, particularly for the elderly, never could be. I am not advocating that it should be and this clause does not propose that it should be. What happens now with medical cover is that it takes out the smaller operations and minor, more routine treatments which otherwise would clog up the NHS. It does not attempt to cover long-term care and should not do so. It is an add -on to the NHS ; it does not pretend to be a substitute for it.

Ms. Abbott : Is it not the case that in practice private medicine is a terrible drain on the Health Service? Is it not the case that the private sector trains no nurses and that every nurse who works in the private sector has cost our Health Service £10,000?

Mr. Carrington : Private medical care is often a great benefit to the National Health Service in making it possible for the NHS to go to private hospitals and relieve the load with which it would not otherwise be able to cope. That is extremely beneficial. For the elderly to be able to get the minor treatment they need and to pay for it themselves and not be a drain on the NHS is to everyone's benefit. It frees up the care which the Health Service can then give to other elderly people who are not able to cover themselves with private insurance.

I believe that the only criticism which could be made of this clause and which in certain circumstances could be justified is that £40 million will be taken away from the NHS and be used to subsidise the tax relief which this clause would create. The sum of £40 million is very small in terms of the total NHS budget. I do not believe that it

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is measurable in the amounts which the Government are increasingly giving to the NHS. The Government are increasing the sums given to the NHS by very large amounts. Indeed, there is every evidence to show that this £40 million is in addition to Health Service resources rather than a substitution or a change in the resources from one point in health care to another.

I therefore welcome the very beneficial effects which I believe this clause will have. It will be a major help to certain sectors of the elderly population. It will have a very limited detrimental effect on the overall tax position, which I believe is well justified by the major benefits to the health care of the elderly and of the country generally.

Dr. Moonie : I listened with great attention and interest to the speeches of the hon. Members for Stamford and Spalding (Mr. Davies) and for Fulham (Mr. Carrington) but had some difficulty in getting the gist of what they were trying to say. I can only conclude that we have here as accomplished a pair of bankers as we have ever had in the House. My granny, Mr. Hogg, as you will well appreciate, being from a similar part of the world, used to have a pair of wally dugs on her mantelpiece. I have heard more sense talked by the dugs than I have heard from that pair this afternoon.

The Chief Secretary, in reply to a remark by me from a sendentary position on the subject of the dock labour scheme, was somewhat dismissive of the analogy which I raised. I put it to the Committee, however, that it is appropriate because, while he was engaged in telling us with hand on heart that his party had no intention whatsoever of extending this tax relief, I attempted to draw his attention to the fact that two weeks before the Dock Work Bill, abolition of, was introduced, his hon. Friends were similarly standing with hand on heart saying that they had no intention of bringing that in either. I merely use that to show just how much faith we can put in the Minister's word on this occasion. I hope this evening to show that this proposal is utterly irrelevant to the health needs of the British people. The National Association of Health Authorities yesterday identified a cumulative underfunding of the NHS totalling £3 billion. We should remember that that association is not exactly stuffed with socialists, if the representatives that I have met are anything to go by. So, at a time when the Health Service is underfunded by £3 billion--and this is said by the Government's friends, not its enemies--the Government have shown us where their real priorities lie by promoting private medicine, not to supplement the NHS--I will come to some detailed arguments on that in a moment--not to ease its burden, but to begin a dubious crusade to change its nature and force more and more people to go to the private sector for a larger percentage of their health care and to leave the NHS to function, as they would like it to, as a safety net for those who cannot afford the insurance premiums for private care, those who in the main are old. I can assure hon. Members that there will not be too many pensioners in my constituency rushing to take advantage of the tax relief on health insurance premiums after this scheme is brought in, assuming, of course, that I fail to persuade enough hon. Gentlemen to change their minds on the matter.

Those who are old, those who suffer from chronic illness and those who are locked in poverty are the ones who will be left, under the Government's ultimate ideas, to be dealt with by the NHS. There will be those with mental

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illness or mental handicap--groups which are not covered by private medical insurance, those who have been so shabbily treated over the past 10 years and, I accept, before that--those for whom our Health Service remains a national scandal and an international disgrace. On the surface, as the Minister said, this is a small fiscal measure, costing, by the Government's admittedly curious accounting system, a mere £40 million in its first full year. It is a modest measure, we are asked to believe by the Chief Secretary to the Treasury, aimed at answering the pitiful cries for assistance that have come to his ears from those who have had their cover paid for them by their employers over the past few years and who will lose it when they become pensioners.

On the contrary, this is not a minor change : it is a significant precedent that is being set by the Treasury, which has been forced into an ideological dilemma by the Prime Minister, who has decided for her own reasons to listen to the voice of self-interest, of special pleading, rather than that of reason. This, make no mistake, is merely the first step in the process. It will not be long before we are told that it is essential to extend it to other age groups and then to other areas of the economy, as the hon. Member for Beaconsfield (Mr. Smith) has mentioned in the past ; to the area, possibly, of education. Before long, by the same logic, they may find the company car just as essential to an elderly person. Mobility is a tremendous component of health, as anybody involved in preventive medicine must know. It is just as logical to extend tax relief to the company car for the person who leaves employment as to extend it to medical care.

Ms. Abbott : On a point of order, Mr. Chairman. I understand that there has just been a High Court ruling that the Government's leaflet on the poll tax is illegal. Would that be of relevance to this debate?

The Temporary Chairman : I doubt whether the hon. Lady could find a way of bringing that in order, although as this afternoon has progressed it seems to me that many things have been in order that might otherwise have been out of order.

Mr. George Howarth (Knowsley, North) : Further to that point of order, Mr. Hogg. Would it be inappropriate at this point to suggest that perhaps the Minister responsible should come to the House and make a statement, because clearly it is a matter of great national importance and the world outside will be very keen to hear how the Government will explain this to the country?

The Temporary Chairman : Whether or not the Minister comes to the Dispatch Box to make a statement is not a matter for me or for the Committee.

Dr. Moonie : I am sure you will agree, Mr. Hogg, that that intervention was most interesting, and I see great consternation on the faces of Conservative Members.

Philosophically, I am implacably opposed to private medical care, but I would not deny another person's right to make his own decision as to whether it is right or wrong.

I oppose the scheme on sound economic grounds as well. Public health care cannot be matched in the private sector at the same price. It is an asset that is the envy of every other civilised nation. It is effective and economical, and is equitable in its treatment of people. It requires only an adequate level of resources, but that has been repeatedly denied to it by the Government, despite the

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Government's protestations and cook-book figures. Those resources have been denied at a time when the Treasury's coffers are bursting with money that could be spent to alleviate some of the country's relatively minor problems.

There are many good reasons why right hon. and hon. Members in all parts of the Committee should oppose the scheme. I disagree strongly with tax allowances or perks. I believe that the tax system should be essentially neutral, and Treasury Ministers probably do as well. However, in the case of mortgage tax relief, right hon. and hon. Members in all parts of the Committee acknowledge that it involves a degree of political expediency as well as moral rectitude in ensuring that people are treated equitably. It is perhaps not as easy to do away with some longstanding privileges as it is with others. In the past, the Chancellor of the Excheque has made statements broadly supporting the view that the tax system should be neutral, and they had my support. In any event, I see no reason for introducing a new form of tax saving that will be paid for out of the public purse. The new scheme must be regarded as a retrograde step. If the Chancellor stays in his job long enough, he too will come to regret it. The deadweight cost alone will be far higher than the Treasury's forecast. Money paid by other people into the Consolidated Fund will be used directly to subsidise the cost of providing a minority with private medical insurance. That subsidy will benefit people who cannot, by any stretch of the imagination, be deemed to be in need of such care.

The scheme is also inequitable. It benefits a minority--not just pensioners, but whoever pays the premium. That can be any relative or friend who can prove that they have stumped up the money. That is unfair in the extreme. The vast majority of pensioners cannot afford private health care, though many of them pay taxes and will be subsidising those who will be enjoying the scheme's benefits. Very few pensioners in my own constituency are likely to enjoy any benefit.

One point that has escaped the attention of most people who, unlike myself, do not have the good fortune to work in health care is that the subsidy will be paid to people who are healthy. Private medical insurance by definition--particularly in respect of the elderly--is not held by those who are sick. If one is sick, one is excluded from joining such schemes. As one of the benefits of private health care is that there is no waiting time, one can assume that the deadweight cost will be borne entirely by people who are either healthy or whose past ailments have already been treated, with very few exceptions. I do not see why a health care benefit should be paid to people who are healthy. Money should on the contrary be spent on those requiring health services and whose medical needs have already been identified.

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I do not believe either that the scheme makes good business sense. The subsidy will go straight into the companies' profits. As was said by my hon. Friend the Member for Dunfermline, East (Mr. Brown), the money will not be passed on for health care. More importantly, private sector costs are rapidly escalating as the companies involved attempt to maintain their margins. Such schemes are largely concentrated in London and the south- east, so it is hardly surprising that their costs are rising at the rate

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that they are. The subsidy will serve to distort the health care market and accelerate the rising premium levels--in much the same way that mortgage tax relief helped to increase house prices over the past decade.

I also oppose the measure on the ground of efficiency. It is targeted at the healthy and at the better off, and is generally wasteful. The same amount of money spent within the National Health Service would bring three times as much benefit. That has been clearly shown in my own constituency. Under a Government's initiative, money was allocated to reduce waiting lists. The health board, quite rightly, tested the market and investigated what the private sector could offer, but it discovered that by rearranging its own wards and theatres three times as many operations could be undertaken there than in a comparable private hospital. That analogy holds good in any other part of the country.

The proposal is senseless. I do not know whether it was dreamt up by the Prime Minister or by some idiot savant in one of her so-called think tanks. Like the rest of the Government's health care proposals, the scheme is born out of expediency and self-interest, and it is not based on any proper analysis of health needs. Therefore, I hope that right hon. and hon. Members in all parts of the Committee will reject it when the Opposition amendment is voted on later tonight.

Mr. Tim Smith (Beaconsfield) : Although I disagree with much of what has been said from the Opposition Benches this afternoon, I must tell my right hon. Friend the Financial Secretary to the Treasury that I have reservations about the scheme, but largely for tax reasons. Before explaining them, I shall touch on one or two details of the proposed relief. I refer first to a sentence in an Inland Revenue press release stating :

"Contracts paying a de minimis, sum of up to £5 a night for small out- of-pocket expenses--for example to cover newspapers and flowers--will, however, qualify."

A cash payment of £35 per week cannot in my view be justified. I know that it is de minimis, but when people enter either a National Health Service or private hospital they make savings in their outgoings. To allow them £5 cash per night out of their policy is wrong.

My second point has been touched on by one or two other hon. Members--that there is no cap on the relief. The table of costs of direct tax allowances and reliefs in the public expenditure White Paper reveals the £30,000 limit on mortgage tax relief, which we all know about, as well as the £4,800 limit on personal equity plans. There is also a £40,000 limit on the business expansion scheme. However, the private medical care scheme imposes no upper limit on the amount of premium qualifying for relief. Although the contract must fulfil certain conditions, there is no upper limit to the premium it involves, and perhaps there ought to be.

I am concerned also about the deadweight cost. The Red Book states that the cost for 1990-91 of £40 million assumes an increase in take-up as a result of the new relief of 10 per cent. That means, of course, that 90 per cent. of the new relief will go to people already paying these premiums, and the whole of that cost, I am sure my hon. Friend will accept, is a deadweight cost. That is a worrying factor because it means that the number of people it is estimated will be able to benefit from the relief is 5 per cent. of the 12 million pensioners in this country, which is 600,000 people. Of those 600,000 people, just 10 per cent.,

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or 60,000, will be taking up this benefit because of the tax relief available. That is exactly half a per cent. of all pensioners.

Mr. Max Madden (Bradford, West) : The hon. Gentleman is making a series of very important points and he has indicated the people who may well benefit from this medical tax relief. Am I right in suspecting that the Prime Minister could be one of those people?

Mr. Smith : The Prime Minister has been mentioned in the course of this debate, but I am not in a position to comment on that. The next thing I am concerned about is the fact that the Treasury has decided that it is appropriate to give the tax relief not just at the standard rate but at the higher rate. There was misunderstanding earlier between my right hon. Friend the Chief Secretary and the hon. Member for Dunfermline, East (Mr. Brown) because two separate pieces of information were given which did not appear to be capable of reconciliation. I think they are. The first is that half of the £40 million will go to higher rate taxpayers. That is a matter of concern because it means that £20 million will go to higher rate taxpayers, so by definition £7.5 million will simply be relief at the higher rate, which is a disproportionately large amount. My right hon. Friend also said that 80 per cent. of the beneficiaries will be standard rate taxpayers. The reason for the apparent discrepancy between those two facts must be that a lot of the people who will pay the premiums are not retired people at all but the children of retired people, many of whom will be higher rate taxpayers. When it comes to whether this relief is justified in terms of taxation policy, we have to look at what is right in principle and I think we should start with the general proposition that we should have, as far as possible, a tax-neutral system and as few tax reliefs as possible. Of course, my right hon. Friend the Chancellor of the Exchequer has done away with quite a few, for example, life assurance premium relief and minor personal reliefs, but we still have quite a large number of tax reliefs, which are listed in the public expenditure White Paper, and they can be justified on two grounds : first of all, on the grounds of encouraging savings and home ownership, and secondly, on the grounds of encouraging enterprise and trying to make the economy more efficient, for example, profit-related pay and the business expansion scheme.

However, this proposed relief does not fit into either of those categories and is difficult to justify in terms of the existing arrangements. The record of the Treasury has not been just to do away with some reliefs, but to cap some others. The £30,000 limit on mortgage interest relief has been with us for some time, so that the real value of it has fallen substantially in recent years, and in this Budget we have seen for the first time a cap on occupational pensions, such as the new qualifying limit for salaries, which will be £60,000. If one chooses to have a pension based on a higher salary than that, one will not get any tax relief.

I support that. It is right that there should be a cap on these tax reliefs, because they are all in effect public expenditure and have to be paid for by other taxpayers. That is why they are listed in a table in the public expenditure White Paper, which I have already referred to. However, this relief, like the mortgage interest relief at source relief, is public expenditure in another way in that it also goes to non-taxpayers. It is more than just a tax

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relief because it cannot be described in that way for non-taxpayers, who have no tax liability. It is a straight subsidy to them, and we should be clear that that is what it is.

Looking at the other arguments used to support this, my right hon. Friend argued that it is a difficult time for people when they retire, because, when in employment, the employer provides this benefit for them. They do not pay for it themselves ; it is a benefit in kind, part of their remuneration package, and the company gets tax relief against corporation tax. On the other hand, of course, they get taxed on it themselves ; they have to pay income tax on the benefit in kind if they are paid more than £8,500 a year, which of course a majority are. The argument goes on that when they retire they are suddenly faced with paying the premium themselves, when they have a lower income because they have gone to their retirement pension. That rather misses the point of why we allow this as a tax deductible cost for employers in the first place. Why do employers pay these premiums? They do it for their own self-interest so that if a member of the work force becomes ill they want to minimise the time he is away from work, and one way of doing that is to pay private health premiums to ensure treatment is received as quickly as possible so that the employee can return to work. That is perfectly reasonable, but we should not kid ourselves about why they do it. Different considerations apply when someone retires, and it is very difficult to justify providing this relief, for the reasons I have already mentioned.

I am sorry to disagree with my right hon. Friend, who said at the end of his speech that it would provide old people with peace of mind. It will never do that because it cannot be comprehensive. It is impossible to insure against every possible contingency and liability which arise in old age. In particular, of course, a lot of old people need long-term care, which is where the high costs arise to the Health Service, and there is no way one can insure against the costs of long-term care. One can insure against short-term illness, which is fine as far as it goes, because it will relieve the Health Service. There is no doubt about that. I am very much in favour of encouraging people as far as possible to use private health care. In the Second Reading debate I said that I have never understood why the Opposition complain that the Prime Minister does not use the NHS, because everybody who does not use it relieves it and there are more resources available for others. I have no difficulty about that. The same is true of the education service.

What we are debating this evening is whether it is right to give those people who make that choice tax relief. I am in favour of freedom of choice, but should we give tax relief to encourage people to make this decision? On the basis of what I have heard, I do not think that the case has been proved.

Mr. Charles Kennedy (Ross, Cromarty and Skye) : I very much agree with the concluding sentiments of the hon. Member for Beaconsfield (Mr. Smith). Clearly the hon. Member for Hackney, North and Stoke Newington (Ms. Abbott) was not listening to him, because many of her colleagues concurred with him as well. We are not against choice in society ; even the policy reviews of today are not against choice in society. We are against choice for the more privileged being tax-funded at the direct expense of the poorer in society. That is the nub of the offensiveness of these proposals, and the subsidy that the

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Government are giving. My hon. Friend the Member for

Berwick-upon-Tweed (Mr. Beith) was quite correct in what he said when he moved an earlier amendment. In his opening speech, the Chief Secretary seemed to express surprise at the depth of feeling this subject aroused, and he said that he could not understand why there was so much concern and controversy, because, after all, it affected only "a limited number of elderly people", so it should be particularly contentious.

We have heard that there is £40 million at stake--a significant sum of money. I do not agree with the hon. Member for Fulham (Mr. Carrington), who seemed to feel that, because it was a minuscule part of the total NHS budget, we should become particularly exercised over it. There is a significant amount of money at stake, but there is also a principle at stake. That principle--this follows directly from what was said by the hon. Member for Beaconsfield--is that the tax system should not be used, wherever possible, to subsidise or enhance choice for the minority at the expense of the majority.

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The Secretary of State for Health and Social Security, as he was at the time, said in a BBC television interview for the programme "On the Record" that he was not considering such tax subsidies, because that was what the NHS was there for. Since the splitting of his Department into the Department of Health and the Department of Social Security, that Secretary of State has been confined largely to social security issues, while the new Secretary of State for Health has introduced a White Paper. I do not think that the proposal in the Budget can now be seen in isolation from other proposals in that White Paper.

While the Budget is willing to fly in the face of the Chancellor's previous statements and his track record on tax reform and tax balance, the White Paper is silent on the subject of resources. There is a striking contrast between the two Departments. One is bringing forward major structural proposals for National Health Service reform, yet has nothing to say about the resources needed to improve the quality of health care. The other--the Treasury--has produced a proposal that, by its own admission, will not put a penny into the National Health Service directly, but will merely provide a subsidy for those who wish to opt for treatment outside the National Health Service. That seems a most curious, convoluted and contradictory set of proposals. Choice is all very well, but that kind of subsidised choice strikes me as offensive when the National Health Service is not receiving the funding that it deserves.

It is pretty clear from the White Paper where the Government are going. They are making no secret of it : the Prime Minister has said many times in the past that she is in favour of a more American-style "go-getting" society. She does not appear to give even a passing thought to those who may have nowhere to go and nothing to get, and that is never more obvious than in health care policy. As a Labour Member has already pointed out, many patients are languishing on waiting lists for referrals to consultants. The proper standard of service is not being delivered. One hopes that adequate health care would be the priority of any Government, whatever their political complexion ; sadly, it is not the priority of this Government.

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It is clear that this type of subsidy will lead us further down the road to private health care. If people are fortunate enough to have a disposable income that allows them sufficient consumer choice to pay the insurance premiums for private health care if they so wish, good luck to them ; I am not making an egalitarian point. How they spend their money is up to them. They should not, however, be able to indulge that choice, created by their security and affluence, at the direct expense of others who enjoy no such benefits and have not the opportunity to go one better at the taxpayers' expense. Sad to say, that fundamental principle is now lost on the Government. Several points have been made about administration. I note that amendment No. 21 endeavours to limit relief to the basic level of income tax. Let me make it clear that I do not believe that such a concession should be introduced in the first place, but if we are to believe reports, the Treasury was never in favour of the subsidy and it appeared in the Budget only as a result of insistence from No. 10 Downing street. If it is to retain any self-respect, the Treasury should go for the option in the amendment rather than for the entirely offensive option of allowing relief at the higher rate of 40 per cent. Limiting it to the basic rate would by no means ameliorate the difficulty that the Government are creating but it would at least save the additional financial and administrative machinery that would be required to collect the top-rate contributions.

It seems bizarre, indeed perverse, that--judging by the figures that have been given in earlier speeches--undue additional resources will have to be devoted within the Treasury or Inland Revenue to top-rate taxpayers who are already receiving an enhancement to the buying power of their income that is well in excess of anything that they deserve. If the Government are so interested in prudence, efficiency and the correct use of public money and Civil Service time, I would expect them to find some attractions in amendment No. 21. The Chief Secretary was at pains to stress the help that the measure would provide for the elderly, and how much it would assist social policy. That view does not seem to be shared by Age Concern or the Royal College of Nursing, both of which have extensive and professional experience. The RCN points to the glaring inequality of the Government's social policy :

"Put simply, clauses 51-54 of the Finance Bill fail the test as a social policy, just as they are fatally flawed as a fiscal policy." That, surely, must be the epitaph on the tombstone of this part of the Bill, and the Treasury, the Government and indeed the Conservative party should be ashamed of it.

Mr. Tony Worthington (Clydebank and Milngavie) : In preparation for this debate I have been reflecting on the way in which society has treated two people in their mid-seventies.

On Friday I was visited in my surgery by a man whom I guessed to be about that age. He complained that he had been to a doctor and had been diagnosed as having psoriasis, an unpleasant complaint. He had been prescribed an ointment, which was gradually dealing with the psoriasis but was destroying his clothing : his underclothes and other clothes were marked in a way that made them unfit to wear. He asked what could be done. Could he obtain cash with which to replace the clothing that had been spoilt by the medical treatment that he had received?

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I thought about it and said, "I cannot think of anything because under the Department of Social Security changes last year special payments have been withdrawn. You might get a loan from the social fund but probably you would not, because you are poor and it would be impossible for you to pay it back." The man needed probably £50 to £100 for basic requirements.

I contrast him with another person in his mid-70s, say, a Mr. Denis Thatcher. According to BUPA, the cost of comprehensive cover for a married couple, where the older of the couple is over 70, would be cut from £1,102 to £661. I assume that Mr. Denis Thatcher pays tax at the rate of 40p in the £. That may be a foolish assumption, because there are enough concessions nowadays for a skilled operator like Mr. Thatcher to make sure that he pays only at the 25 per cent. level. At the 40 per cent. level, that would be a direct gift--

Mr. Couchman : On a point of order, Sir Anthony. Is it in order for the hon. Gentleman to make disparaging comments about someone who has no possibility of answering the comments? I think that it is a most disgraceful slander.

The Temporary Chairman (Sir Anthony Meyer) : It is a point for debate ; it is not out of order.

Mr. Worthington : I would be delighted to give Mr. Thatcher the opportunity to reply and to debate the issue with me. It is a fair point to make that the Government are offering a choice about how to spend money. If someone in the position of Mr. Thatcher were to take out a BUPA comprehensive scheme, he would get a direct gift of £440. It is a question of priorities. Have the Government got the priorities right? Will the people who will receive the gifts from the taxation system merit those gifts? Should they have priority? There has been reference in the debate to the fact that the Chancellor unfortunately has turned away from his attempt when he became Chancellor to turn taxation and the receipt of income into a level playing field, so that all kinds of income were treated fairly and equally. I would have supported him in that attempt, but that is not what we are getting now.

The proposal will lead to a direct gift from the rest of us to a group of people to enable them to take out private medical insurance after the age of 60. As has been said many times, there is an element of dishonesty about costing it at £40 million. That might be the cost in the first year, but it would be more honest to say that the total cost will be much greater. Many hon. Members have pointed out the sheer unfairness of the proposal. Someone on a higher rate of taxation could get the higher rate of tax relief on his income because he supported the health insurance of a relative or someone who was not even a relative

Mr. Jeremy Hanley (Richmond and Barnes) : Is the hon. Gentleman trying to say that those who choose to take out health insurance are by definition rich and those who choose to use the National Health Service exclusively, without taking out health insurance, are by definition poor? Surely some very wealthy people choose not to take out health insurance, thus taking pressure off the Health Service, and some people with very little money choose to use their money for things such as private education or private health care because they believe that that is best for

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them and their family. I hope that the hon. Gentleman is not making the mistake of assuming that all people in that category are rich. 7.15 pm

Mr. Worthington : That was a strange intervention, which would have been better made in a speech by the hon. Gentleman. There seems to be a shortage of speakers on the Government side. His intervention was not related to anything that I was saying. I invite the hon. Gentleman to make his own speech in his own time.

What is inadequate and wrong about the proposal is that we are subsidising through taxation the private health sector. We are subsidising a relatively inefficient system compared with the National Health Service. It does not matter which yardstick one takes when considering health care in this country or in the rest of the world ; it costs more to provide services through the private sector than through the National Health Service.

Under the private system, human health care is moved into the world of garage and motor mechanics. What I mean by that is that if one is unfortunate enough to have an accident with the car, the immortal words spoken by the mechanic are, "Is it an insurance job?" If it is, that means that it will be bonanza day for the owner because of the treatment that his car will receive, and it will be bonanza day for the garage because of what it can charge. That is the experience with private health insurance as well. Wherever private health insurance has been introduced, up go the costs. One gets unnecessary medicine, which is administratively very expensive. That is what we are being asked to subsidise through the Government's proposal.

Going back to the idea of a level playing field, when rates of income tax were heavily progressive--I would argue, probably against my party, that they were too severely progressive and that it was counter-productive-- there was a case for people seeking to receve part of their income in perks. It might be argued that, in the past, the British entrepreneur or executive was underpaid compared with his European equivalent. He may have been underpaid, but he was certainly over-perked. It is difficult to find any other European country where there are so many ways in which people can receive tax relief with the agreement of the Government.

I thought that the Government had recognised that tax perks were counter- productive and that all income should be treated equally. I was applauding the fact that the MIRAS scheme was being limited to £30,000 and was being phased out, although that was unspoken. One welcomes that and the fact that the tax perk of the company car is being made less valuable.

A great many other perks remain. I am grateful to the Monks Partnership Ltd. for its work on board and senior management remuneration which pointed out that, among senior managers, 84 per cent. get free medical insurance, virtually all are given life assurance policies, 53 per cent. have their home telephone costs fully or partly met by their companies and 54 per cent. receive free newspapers--that is the level it gets down to. According to The Economist, 30 per cent. have their golf club fees paid. We should be getting away from that style of paying people. We should have fairness for everyone.

The extension of a tax break on health insurance premiums for people over 60 is a step in the wrong direction. However one looks at it, it is a non- selective

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