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4.30 pm
We are faced with a guillotine in Committee and, as a result of the Chancellor's decision, with a guillotine on these tax reliefs. It is incumbent on the Government to think hard about the transitional effects and to soften them where appropriate. I genuinely do not want to press the Financial Secretary on this matter, except to ask her to consider these essentially Committee points and see whether she can come up with some alleviation.
I shall now deal with the general issues that are more germane to the amendment. There is a continuing incoherence in the Government's figures, which is why we want a structured and comprehensive report on what is going on. It is remarkable that the Budget Red Book of 2 July refers to the potential catch in the withdrawal of this relief. It refers to a third of a million people--which is an unusual fraction for the Red Book--whereas the Financial Secretary, in a written answer 24 hours earlier on 1 July at column 108 of Hansard, referred to a written answer given by the previous Government in the shape of my right hon. Friend the Member for Fylde (Mr. Jack) on 13 March at column 322, which referred to 600,000 people. That figure seems to be in line with independent studies, although the precise number is not certain.
The Financial Secretary to the Treasury (Dawn Primarolo):
If the hon. Gentleman studies the parliamentary answer to which he referred, he will see that the figure was an estimate, not an exact figure.
Mr. Boswell:
If so, we were given an estimate of 600,000 on 1 July, and another estimate of a third of a million in the Red Book on 2 July. That is a divergence of almost 100 per cent.
Dawn Primarolo:
I refer the hon. Gentleman to the Adjournment debate that was secured by the hon. Member for Eastbourne (Mr. Waterson). The figures were given in that debate and were confirmed in a written answer to his hon. Friend.
Mr. Boswell:
I am grateful for that information. We shall reflect on what the Financial Secretary said and we shall come back to her if appropriate. Throughout this process we have had some difficulty getting answers to written questions.
The hon. Lady just said that the figure given was an estimate. That is precisely the point. We are still uncertain about the impact of this measure, which is why we are calling for a full analysis.
My second point concerns the likely impact on national health service waiting lists. On 14 July, which was after the Budget, the Minister of State, Department of Health, the hon. Member for Darlington (Mr. Milburn) was asked by my hon. Friend the Member for Romsey (Mr. Colvin) to estimate the impact on waiting lists. The Minister replied:
Perhaps it should no longer surprise me that the Government not only cannot get their figures overtly consistent but do not appear to be able to read reports that have been commissioned from reputable outside bodies, notably the Economists Advisory Group. A detailed report, which is in my hands, was sent by that group to the Secretary of State for Health and to the Chancellor and the Financial Secretary in mid May. It must have been in their hands when they were preparing their Budget proposals.
It seems from the answer that I quoted a moment ago that the Government may be claiming that ignorance is a defence. They may claim not to have read the EAG report, which makes challenging reading. It analyses price elasticity for private medical insurance and the flows that are reported in the series, with which some hon. Members will be familiar, on private medical insurance by Laing and Buisson. It suggests some systematic flaws in those recent studies. For example, it suggests that they do not separate out the price impacts from total revenue, and the effect is that they grossly under-estimate the results of price increases on demand and the cost of medical services.
According to the Economists Advisory Group analysis, which I remind the House is in the hands of the Financial Secretary, what seems to have happened is that people have been trading down in response to the higher premiums that are required as they move into the next quinquennium of their health insurance and because health insurance is getting more expensive anyway because of higher costs and greater demands on the service. As people have been trading down, health insurance tax relief has enabled them to maintain their membership of a scheme. I did that myself, although I did not benefit from health insurance.
The danger is that people will no longer trade down, but will trade out altogether and go back to the national health service. Our amendment does not state absolutely that that will happen, but that everyone should pause while the matter is properly analysed.
Some of the proposals are a little high flown and complex, even for lay economists like me. It is necessary to put the matter in English in terms of its impact on the
individual. I was impressed by the Economists Advisory Group's quotation of the comments of one elderly policyholder:
I draw the House's attention to one specific point that is incontestable in terms of the Red Book figures. There is a suggestion of a small saving from the withdrawal of this relief because it is being taken away midway through the tax year in year one, 1997-98. However, we know from the Budget statement that no additional funds have been made available to the national health service in the current year. All that the Chancellor did was pre-empt some of the reserve that was available for 1998-99 and commit it five months ahead of the normal time to the health service, so if even one person with private medical insurance has to chuck it in and go back to the NHS, he will go on a waiting list and there will be no extra money to fund provision for him.
If the Financial Secretary studies the analysis, she will see that there is strong resistance among insurance policyholders to increases, which tend to take place every five years as they move into a new medical insurance bracket and annually as costs rise in both the private and public sectors of the health service.
It is difficult to calculate exactly how many people will leave. I have mentioned that it appears--I do not think that the Financial Secretary dissented, but I will need to study the record carefully--that the probable net number of policyholders who will be affected by the changes is about 600,000. I am not claiming that all those people will go back. What I can say is that the EAG study worked out that, for acute major procedures only, about 30,000 policyholders per annum could go back, increasing NHS waiting lists by that number.
Two other points also cast grave doubts on the Government's arithmetic in working out the benefit to the Treasury of the changes. First, there will be a loss of insurance premium tax from any withdrawal of policyholders. The insurers estimate that that loss will amount to about £7 million a year. Secondly, the health service benefits from the use of private beds in NHS hospitals and that benefit is estimated to be about £20 million a year.
In the amendment, I have been seeking not to give a final, definitive answer to the question how many of the 600,000 people will up sticks and go back into the NHS, but to suggest that there is a sufficient problem here for the House not easily to accept the changes without a proper, published study and discussion. We could, for example, ask the Health Committee for a short report.
Many of these people will not only suffer, but indirectly impose a further load on the NHS. Frankly, we should be told more. The net effects of the changes should be properly analysed and their damaging effect on individuals avoided until these matters have been cleared up and thoroughly resolved.
Dawn Primarolo:
Nice try. That is a standard ploy of oppositions: when in doubt, ask for a report. We used it
"Any such estimate would be pure speculation. Most of the people who benefited from the tax relief were existing policy holders. It would be wrong to assume that they will turn to the National Health Service in large numbers for treatment because the relief which had not been available when they first opted for private health insurance was now being withdrawn."--[Official Report, 14 July 1997; Vol. 298, c. 78-9.]
I understand that line of argument, which is fairly familiar from the Treasury, but it is rather alarmingly plain that it is suggested that nobody knows anything about the subject. We know quite a bit about it, and what we know gives rise to concern about the Government's estimate of the saving. The matter should be more thoroughly reviewed.
"We pay £133 a month but if the tax relief were abolished the cost would go up to £173 a month, which is really prohibitive. It seems a tragedy that we have been members of BUPA for such a long time then just when we need the cover the most we would find it expensive."
We are dealing with a known hit on a significant number of electors and constituents set against a speculative benefit to the national health service.
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