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I enjoyed the brave, reflective and well-measured speech by the hon. Member for Horsham (Sir P. Hordern). His was the authentic voice of what used to be the Tory party before the current leader got her hands on it. He weaved compassion throughout his speech.

The hon. Member for Beaconsfield (Mr. Smith) made an able, measured speech urging caution, particularly on taxation. I wholly agreed with him. I shall do him a great deal of harm, but just for once the hon. Member for Eastbourne (Mr. Gow) made a great deal of sense on the points that he raised about taxation. I agreed with what he had to say up to the point when he said that he would vote for clause 51 anyway. There is no need for him to do that, as he is no longer a Minister. He should exercise his

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independence and do what his heart tells him to do, which is to side with the Labour party. The people of Eastbourne will forgive him--on this occasion.

Mr. John Smith (Monklands, East) : That is an important qualification.

Mr. Brown : It certainly is in Eastbourne.

My hon. Friend the Member for Kirkcaldy (Dr. Moonie) brought to the debate the voice of a doctor, a professional man who knew what he was talking about. It is interesting that the first interventions in support of the Government came from merchant bankers, as one of my hon. Friends pointed out, but the speech that made the most telling impact came from a member of the medical profession. My hon. Friend the Member for Kirkcaldy pointed out that clause 51 is irrelevant to the nation's health needs. It is designed not to supplement the National Health Service, but to change its nature. My hon. Friend was speaking for the whole of the Labour party when he said that we are implacably opposed to the proposal. We are opposed to it on philosophical and economic grounds, and on the ground of social justice. I urge the Committee to support the amendment and to reject clause 51.

Mr. Norman Lamont : We have had a lively debate in which there have been some strong speeches from Opposition Members and some excellent speeches, not only from those to whom the hon. Member for Newcastle upon Tyne, East (Mr. Brown) referred, but from my hon. Friends the Members for Maidstone (Miss Widdecombe), Stamford and Spalding (Mr. Davies), Gillingham (Mr. Couchman), Fulham (Mr. Carrington), Gedling (Mr. Mitchell) and Wyre Forest (Mr. Coombs), all of whom supported the Government's policy enthusiastically. As the hon. Member for Newcastle upon Tyne, East said, my hon. Friend the Member for Eastbourne (Mr. Gow), after judicious and judicial deliberation, also supported our policy and we welcome that.

My hon. Friend the Member for Eastbourne asked whether clauses 51 to 54 had been discussed with the European Commission. The answer is no. There is no need to discuss the clauses with the Commission, but we have had to take account of EC law in framing the provisions and that relates directly to the point that the right hon. Member for Llanelli (Mr. Davies) made and that he encapsulated in amendment No. 8. One of the benefits of the wide market within the European Community, as he knows, is that the United Kingdom financial services industry has the opportunity to compete within Europe. That opportunity extends to the non-life insurance services on which an EC directive becomes fully effective next year. It is, therefore, right that as long as United Kingdom insurance companies are able to market non-life insurance in Europe, European insurers should be able to compete for business in the United Kingdom on equal terms with British insurers. That is why clause 51 offers the new tax relief when medical insurance cover is provided by a Community insurer, as well as when it is provided by a British insurer.

The relief at source scheme will not be available when the insurer has no presence in the United Kingdom. In that case, the individuals themselves can claim the relief from their tax office. The benefit of tax relief goes to the person taking out the insurance policy, not to the company.

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The right hon. Gentleman also asked about the taxation of insurance companies and provident associations and what happened if they did not pay tax. The amount claimed back has nothing to do with the insurer's tax liability. It is the relief that the subscriber has withheld on his premium that matters. I hope that that answers the right hon. Gentleman's question.

Mr. Denzil Davies : On the point about the EC directive, does the Prime Minister know about that? And did I hear the Minister say that an EEC insurance company that was not trading in Britain cannot claim back from the United Kingdom Inland Revenue the tax that has been deducted in paying the premium? Is that what the right hon. Gentleman said?

9.45 pm

Mr. Lamont : I said that relief would have to operate in a different way. The company would not be able to get relief at source, which is a different matter--

Mr. Davies : Will the European insurance company get the tax back? I am not concerned how it happens, but does the relief go to the insurance company in the end?

Mr. Lamont : The answer is no.

My hon. Friend the Member for Eastbourne asked another question about non- taxpayers claiming relief. There seems to have been a degree of confusion about the matter. Non-taxpayers can benefit from what is proposed ; the insurer can claim the amount even though the individual is not a taxpayer. That is not a new principle. It is precisely what happens with mortgage interest relief--with MIRAS. The fact that relief is available for non- taxpayers is one answer to those who say that the scheme is only for the rich and that it benefits only the better off. I emphasise that, in operating a MIRAS-type scheme for health insurance, the Inland Revenue auditors will be checking the insurers' books to ensure that the scheme is being operated wholly properly, just as they do with MIRAS.

Mr. Win Griffiths : Is the Minister aware that an EEC directive that is currently being discussed would allow small companies not to be subject to compulsory audit? I know that the Government are against that aspect of the directive, but if it were introduced surely what the Minister has just said would no longer be true.

Mr. Lamont : An Inland Revenue audit has nothing to do with a statutory audit for Companies Act purposes, so the hon. Gentleman is slightly off beam, I am afraid.

The hon. Member for Berwick-upon-Tweed (Mr. Beith) asked whether the non- taxpayer would still have to fill in a form. The answer is yes. He would still be allowed to benefit from the tax relief, even as a non-taxpayer. I stress the role of the Revenue in looking at companies' books.

The right hon. Member for Llanelli suggested that people might take out insurance shortly before they went into hospital as a means of obtaining tax relief, rather like the man who takes out fire insurance just as his house begins to catch fire. In the first place, I think that it would be difficult to persuade the insurance company to give the relief, and in any case it would certainly not be approved by the Revenue.

Opposition Members asked about the deadweight cost. There are about 300,000 medical insurance policyholders

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aged over 60 at present. The cost of £40 million in 1990-91 is based on the assumption that there will be a further 10 per cent. take-up in that year on top of the growth that we would otherwise have expected. My hon. Friend the Member for Beaconsfield (Mr. Smith) stressed the deadweight and how little additionality had been provided for. We strongly hope that people will take advantage of the relief and, although we are making only a modest assumption in the first year, hon. Members should remember that it is only a first-year cost.

While emphasising the deadweight, Opposition Members have said, slightly inconsistently, that the cost of the measure could be very high, depending on the take-up. They advanced some alarmist arithmetic to suggest that if there were a 100 per cent. increase in the number of pensioners with provision for private health insurance, the cost might be hundreds of millions of pounds. Even a 100 per cent. increase in take-up would increase the cost only to £70 million. Opposition Members have made that mistake because they greatly overestimate the cost of a typical health insurance policy taken out by elderly people.

The hon. Member for Newcastle upon Tyne, East paraded some figures. He must have carried out much research to find the most expensive policy available, because the real facts are different. A policy of the sort most commonly marketed to the over-60s currently costs about £450 a year for a couple aged up to 69, rising to about £600 at age 70. The cost of tax relief will on average be less than £100 per head.

Equally, the hon. Member for Bridgend (Mr. Griffiths) talked about PPP insurance cover for someone aged 65 to 74 costing £670 in tax relief. I have the PPP leaflet here and the annual premium for its retirement health plan for people aged 70 to 74 is just over £300, on which tax relief at 25 per cent. would be £75. The cover for someone aged 65 to 69 would cost even less.

Mr. Win Griffiths : From memory, the figure that I quoted was for a couple, one of whom was over 70. It was not for one individual.

Mr. Lamont : I have put the facts as they appear in the leaflet.

Mr. Battle : Many people take out minimum limited cover.

Mr. Lamont : Of course, as the hon. Gentleman just shouted out, many elderly people take out limited cover and the cost of that is much less, and so, too, is the tax relief. I do not see anything about which to apologise.

A number of my hon. Friends, especially my hon. Friends the Members for Beaconsfield and Horsham (Sir P. Horden), made it clear that they had a number of reservations about the clause. My hon. Friends the Members for Horsham and for Beaconsfield made it clear that their objections are very different from those put forward by the Opposition. My hon. Friends made it clear that their main objections were on grounds of tax policy. They believed that there should be fewer reliefs but lower rates. We have, of course, always made it clear that it would always be difficult, and probably not possible, to reach an entirely neutral tax system. As my hon. Friends know, we have certainly abolished some tax reliefs, but we have created others where we have thought they were socially or economically desirable. My hon. Friend the Member for Beaconsfield said that he thought that tax

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relief for saving or enterprise would be his choice, but why not also tax relief for helping the elderly or for relieving pressure on the National Health Service?

My hon. Friend the Member for Beaconsfield suggested that, perhaps, we should have a cap on the relief, which was a point made by a number of Opposition Members. An analogy was drawn with relief only being allowed on the first £30,000 of a mortgage. However, there are limits on the amount of money that one can spend on medical insurance. What one is allowed to spend it on will be limited and defined in the regulations that will be specified under the Bill. We believe that the average cost will be about £100.

The hon. Member for Newcastle upon Tyne, East referred to comments made by my right hon. Friend the Chief Secretary and my written answer. I assure the hon. Gentleman that there is no inconsistency between myself and my right hon. Friend. My right hon. Friend was right when he said that up to 80 per cent. of those covered will be basic rate taxpayers or not liable to tax. Opposition Members have not realised the difference between those paying the premiums and those covered by the premiums. My right hon. Friend's assertion is in no way inconsistent with my parliamentary answer, when I said that we expect that slightly more than half of the cost of tax relief will go to basic rate or non-taxpayers and half to higher rate taxpayers. The hon. Member for Holborn and St. Pancras (Mr. Dobson) referred to schemes which provided private sector treatment only if treatment was not available within the NHS within a few weeks. He asked how the schemes would relieve pressure on the National Health Service. I advise him that such schemes offer genuine medical insurance and, although they give a limited form of cover and a limited availability of private medical treatment, the premiums are lower and, to a limited extent, they still relieve the pressure on the National Health Service. Therefore, they qualify for the relief.

The hon. Member for Holborn and St. Pancras referred to the schemes that are offering cash benefits. We do not see why schemes that offer cash benefits should qualify for insurance because the whole purpose of the provision is to relieve the pressure on the National Health Service, not to give cash benefits unrelated to medical care. However, as my hon. Friend the Member for Beaconsfield picked up, we have allowed a de minimis amount of £5 per day, but I emphasise that that £5 per day is in addition to medical cover being provided. It is supplementary to that. There is no question of people getting tax relief for cash allowances without having private medical treatment.

Mr. Nicholas Brown : I understand what the right hon. Gentleman means about de minimis and, although £5 per day tax free may be de minimis to him, it is quite a lot of money to many old-age pensioners. I am not sure that that exclusion in the regulations is not intended to help sell the schemes.

Mr. Lamont : I very much doubt that because many of the cash amounts that are provided through schemes are substantially higher than that amount. In terms of the tax relief, the cost of £5 for the relatively short period of most illnesses is absolutely minuscule and does not add to the cost of the scheme.

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We believe that the scheme is justified. It is targeted and limited. It is aimed specifically at elderly people--at the over-60s. We have explained that we believe that many people who may have had company schemes and who may have contributed to private health insurance during their working lives find difficulty in maintaining such payments in retirement and that it is right to help them in that situation.

Opposition Members have said that the money would be better spent on the National Health Service, but it is not an alternative. We are talking about an additional modest sum of £40 million, which is 0.15 per cent. of the total spending on the National Health Service and 1.6 per cent. of the increase in 1989-90. As my hon. Friends know, we are increasing spending by £2.5 billion this year and by £2.5 billion next year. That is a total increase of £5 billion in our spending on the National Health Service. A small, modest tax relief amounting to £40 million will help the Health Service in a different way by relieving the pressure on it.

Opposition Members have also said that the provisions will undermine the National Health Service. I do not believe that for one minute. The fact that we have committed such huge resources to the National Health Service is evidence of that. The proportion of GDP spent on the National Health Service is higher today under this Government than it was under the Labour Government. That demonstrates that we have no intention of undermining the National Health Service. I repeat that the provision is designed to relieve pressure on the National Health Service. The hon. Member for Clydebank and Milngavie (Mr. Worthington) wondered how, but, by definition, a person using the private sector is not using the National Health Service. It is a fallacy to believe that medical resources are somehow fixed and limited and that they cannot be increased in response to extra demand. My hon. Friend the Member for Beaconsfield said that he did not doubt that and that he was satisfied that there would be some relief of the National Health Service but that he wondered why we had to have tax help as well. We believe that, over time, it will be a good bargain. The cost of the tax relief will be only £100 per person and the cost of the National Health Service per person over 60 is £850 for hospital treatment and £1,000 for the National Health Service provisions as a whole. Therefore, over time the tax relief will be cost-effective, notwithstanding the inevitable deadweight in the initial stages.

We do not see the growth of the private sector as a threat to the National Health Service. As my hon. Friend the Member for Eastbourne said, we want a partnership between the Health Service and the private sector. As he said, it is part of the philosophy of the White Paper that the two should grow together. The growth of the private sector is not a bad thing.

Tax relief will generate additional resources. In an excellent speech, my hon. Friend the Member for Stamford and Spalding said that someone will obtain the tax relief only if the resources are provided for private health out of his own pocket. The total resources made available are not just the cost of the tax relief but of the person's expenditure on top of the tax relief. For a 40 per cent. taxpayer that means that the tax subsidy will be multiplied two and a half times. That is how extra

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resources will be brought into the Health Service as a result of this relief. That is how pressure on the National Health Service will be relieved.

I do not believe, as Opposition Members seem to do, that resources are finite, or fixed and cannot be increased. This relief will help health services both public and private. Therefore, it is in the interests of everyone in the country and I urge my right hon. and hon. Friends to reject the amendment.

Amendment negatived.

Question put, That the clause stand part of the Bill :

The Committee divided : Ayes 238, Noes 183.

Division No. 191] [10.00 pm


Aitken, Jonathan

Alexander, Richard

Alison, Rt Hon Michael

Allason, Rupert

Amess, David

Amos, Alan

Arbuthnot, James

Arnold, Tom (Hazel Grove)

Ashby, David

Atkins, Robert

Baldry, Tony

Banks, Robert (Harrogate)

Batiste, Spencer

Beaumont-Dark, Anthony

Bellingham, Henry

Bendall, Vivian

Bennett, Nicholas (Pembroke)

Blackburn, Dr John G.

Blaker, Rt Hon Sir Peter

Body, Sir Richard

Boscawen, Hon Robert

Boswell, Tim

Bottomley, Peter

Bottomley, Mrs Virginia

Bowis, John

Boyson, Rt Hon Dr Sir Rhodes

Braine, Rt Hon Sir Bernard

Brandon-Bravo, Martin

Brazier, Julian

Bright, Graham

Brooke, Rt Hon Peter

Brown, Michael (Brigg & Cl't's)

Bruce, Ian (Dorset South)

Buchanan-Smith, Rt Hon Alick

Buck, Sir Antony

Budgen, Nicholas

Burns, Simon

Burt, Alistair

Butler, Chris

Butterfill, John

Carlisle, Kenneth (Lincoln)

Carrington, Matthew

Chalker, Rt Hon Mrs Lynda

Chope, Christopher

Churchill, Mr

Clark, Dr Michael (Rochford)

Clark, Sir W. (Croydon S)

Colvin, Michael

Coombs, Anthony (Wyre F'rest)

Cope, Rt Hon John

Couchman, James

Cran, James

Currie, Mrs Edwina

Curry, David

Davies, Q. (Stamf'd & Spald'g)

Davis, David (Boothferry)

Day, Stephen

Devlin, Tim

Dorrell, Stephen

Douglas-Hamilton, Lord James

Dunn, Bob

Durant, Tony

Eggar, Tim

Evans, David (Welwyn Hatf'd)

Evennett, David

Fallon, Michael

Favell, Tony

Field, Barry (Isle of Wight)

Fishburn, John Dudley

Fookes, Dame Janet

Forman, Nigel

Forsyth, Michael (Stirling)

Forth, Eric

Fox, Sir Marcus

Franks, Cecil

Freeman, Roger

French, Douglas

Gardiner, George

Garel-Jones, Tristan

Gill, Christopher

Glyn, Dr Alan

Goodhart, Sir Philip

Goodlad, Alastair

Goodson-Wickes, Dr Charles

Gow, Ian

Grant, Sir Anthony (CambsSW)

Greenway, Harry (Ealing N)

Greenway, John (Ryedale)

Gregory, Conal

Griffiths, Peter (Portsmouth N)

Grist, Ian

Grylls, Michael

Gummer, Rt Hon John Selwyn

Hague, William

Hamilton, Hon Archie (Epsom)

Hamilton, Neil (Tatton)

Hanley, Jeremy

Hannam, John

Hargreaves, A. (B'ham H'll Gr')

Harris, David

Haselhurst, Alan

Hawkins, Christopher

Hayes, Jerry

Hayward, Robert

Heathcoat-Amory, David

Heddle, John

Heseltine, Rt Hon Michael

Hicks, Mrs Maureen (Wolv' NE)

Hicks, Robert (Cornwall SE)

Higgins, Rt Hon Terence L.

Hind, Kenneth

Hogg, Hon Douglas (Gr'th'm)

Howarth, G. (Cannock & B'wd)

Howell, Rt Hon David (G'dford)

Hunt, David (Wirral W)

Hunter, Andrew

Irvine, Michael

Irving, Charles

Jack, Michael

Jackson, Robert

Janman, Tim

Jones, Gwilym (Cardiff N)

Jones, Robert B (Herts W)

Kellett-Bowman, Dame Elaine

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