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Mr. Deputy Speaker: With this, it will be convenient to discuss the following amendments: No. 2, in page 10, leave out lines 32 to 36.
No. 5, in page 10, line 41, at end insert 'and'.
No. 3, in page 10, line 43, after 'contract', insert
No. 6, in page 10, leave out from beginning of line 44 to end of line 3 on page 11.
No. 4, in page 11, line 4, after 'section', insert--
Mr. St. Aubyn:
The amendment raises some technical points but also some issues that are fundamental not only to clause 17 but to the whole way in which the Bill has been framed and forced through the House.
On 16 July, my hon. Friend the Member for Daventry (Mr. Boswell) and I discussed a number of important cases of private medical insurance for which the intentions of clause 17 were not adequately clear. We identified three types of medical insurance. The first is verbal contracts entered into before the cut-off date mentioned in the clause--2 July--but where the confirmatory documentation had come after that date. The second is contract renewals, where an insurance company's client had agreed before 2 July the contract renewal of an insurance policy for another year, but where the contract came into effect after 2 July.
The third type of contract, and by far the greatest number--in the case of one insurer, almost half of its business is written in this way--consists of annual contracts written as a series of monthly contracts. This method of writing insurance contracts has been approved by the Inland Revenue because it avoids some of the complications of the Consumer Credit Act 1974. It is an entirely legitimate and approved way of doing business, yet clause 17 is unclear about how such contracts would be treated. Would the relief end at the end of the next month and at the start of the next monthly contract, or would it carry through to the end of the series of monthly contracts?
Those were the points which we put to the Financial Secretary to the Treasury. We did not ask for an immediate response. We understand that they are technical points. The hon. Lady was free to go away and think about the matter before clarifying to us what the clause was intended to do. But she wasted no time in putting my hon. Friend the Member for Daventry and me firmly in our place. She said that we simply had not read the clause clearly, and that if there were any doubts, the answers would be found in the explanatory notes from the Inland Revenue.
My hon. Friend and I reread the clause and the explanatory notes, but I am sorry to say that we found nothing dealing with verbal contracts, nothing that resolved our concerns about contract renewals and
nothing at all about monthly contracts. We were grievously misled, albeit perhaps unintentionally, by the words of the Financial Secretary.
If one reads Hansard, there is no doubt that we were given assurances that the answers would be found, but they were not to be found. If ambiguous clauses are put together in haste, as part of a Budget put together in haste, it is no use complaining if others do not grasp the intended meaning of the clauses. When others ask for clarification of the meaning, it is not good enough to hide behind official documents and statements that do not answer the specific questions raised.
I raised the matter with the Leader of the House, who told me in the Chamber that the correct forum for discussing it would be at a later stage in the proceedings on the Bill. So we are here tonight, in the correct forum to discuss how those important cases are to be treated.
The assurances that I hope we will get from the Financial Secretary must depend of the credibility of her words. Will she take this opportunity to correct another misstatement that we heard on 16 July? In the process of dismissing our concerns, which still exist, the Financial Secretary said:
Did the Financial Secretary utter those words because she failed to read that important report on the effects of withdrawing relief on medical insurance, or because she failed to remember what she had read in the report, or did she simply fail to tell us, even though she had read the report and she did remember it? Perhaps she will let us know in which sense she misled us on this vital point.
There is an irony about clause 17 coming from a Government who claim to govern for the many, not the few. The irony arises from the clause, coupled with the relief on the rate of VAT on fuel. The combined effect of those two measures is regressive. Although the savings on fuel will benefit most those who spend the most on fuel, the study that I mentioned and others that I have received from insurance companies make it clear that--
Jacqui Smith:
Does the hon. Gentleman agree that the definition of regressive taxation is based on the proportion of a person's income that the tax takes, not the absolute amount? Therefore, because VAT takes a larger proportion of the income of those on lower incomes, it is regressive. It is not the absolute amount but the proportion that matters.
Mr. St. Aubyn:
If the hon. Lady will wait a moment, she will realise that the combination of measures is indeed regressive. Studies have shown that waiting lists will go up as a result of the measure. Some people will not be able to afford the premiums without the tax relief.
According to the report that I mentioned, an increase of 30,000 a year on waiting lists will be the first result of the measure, and those numbers will be concentrated. Everyone--not just the few, but the many--will have to wait longer if they want a hip replacement operation, cataract procedures, a coronary bypass or other operations commonly required by elderly people, many of whom never aspired to private medical insurance, but all of whom will be affected as those who had such insurance revert to reliance on the health service and add to the waiting lists.
Liz Blackman:
Is the hon. Gentleman aware that insurance companies such as the Norwich Union already have advertisements in the newspapers stressing that there will be virtually no impact on their customers? They calculate that the impact will be virtually nil and that they will retain their customers.
Mr. St. Aubyn:
I am sure that the hon. Lady is old enough to know that one should not believe everything that one reads in an advertisement. However, if one is so under the spell of people who are in love with advertising, such a mistake is understandable.
Many prominent insurance companies have written to me, to my hon. Friends and to others, making it clear that although they will try to mitigate the effect of the change by offering people restricted cover, which they can do on terms that do not substantially increase the premiums, the collective effect of restricting the cover means that certain expensive medical procedures will not be covered, and when those operations are required by some of their clients, they will have to be performed on the NHS. The burden on the NHS will be spread over the entire community, and the waiting lists for the entire community will increase. We should be in no doubt about that.
Mr. Caplin:
Will the hon. Gentleman tell the House how many people who have taken out such insurance will be affected? I have listened to him for 13 minutes now and he has not given us any facts.
'and in each case the contract is for a period of not more than 12 months'.
'(i) where the insurer has agreed to issue a continuous monthly series of contracts in a form previously approved by the Inland Revenue then each in such series of contracts shall be treated as part of one whole contract commencing on the first day of the first contract in the series and ending on the last day of the last contract in the series and each monthly payment thereunder shall be treated as a part of the whole payment under that contract, and
(ii).'.
"There is no indication that those who have private medical insurance and receive relief will change their minds because of our decision."--[Official Report, 16 July 1997; Vol. 298, c. 417.]
My hon. Friend the Member for Daventry pointed out that there had been a report recently from the Economists Advisory Group which made it clear that the withdrawal of the relief would have an effect on the numbers who take out private medical insurance. We know as the result of a letter from one of the insurance companies that the Financial Secretary had received a copy of that report in mid-May, yet she told us in July that there was "no indication" of the effect of the relief being withdrawn.
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