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Mr. Boswell: I am grateful to the hon. Gentleman for giving way, or perhaps simply subsiding. The reason why I did not quote from Laing is that I quoted from the Economists Advisory Group study, which went into the arguments of Laing and his colleagues very thoroughly and in my view more than adequately exploded them.
Mr. Cranston: I am reminded of the particular point that the hon. Member for Daventry made on Second Reading. The report from the Economists Advisory Group shows that the abolition of the relief would mean at most 30,000 more persons using the NHS. That certainly does not stack up against the figure of 1 million mentioned by the hon. Member for Guildford.
Mr. Cranston: I am about to conclude my remarks.
Mr. Gibb: The amendment would mitigate some of the crudities in the implementation of a very unjust and vindictive clause. When she winds up the debate, the Financial Secretary will no doubt claim that clause 17 is so important that the Government must dismiss the amendments out of hand. She will no doubt say that the
Opposition have not presented a valid case showing that the tax relief introduced in 1990 increased the number of people over the age of 60 who took out medical insurance. She will say that, as a consequence, the Government have every right to ride roughshod over the House and to abolish the relief with no subtle amendments being accepted because the Government know best on this issue, as on everything else.
Jacqui Smith: Does the hon. Gentleman accept that it is not just the Government who know best? In 1991, the former Chief Secretary to the Treasury, Mr. William Waldegrave--who, sadly, is no longer with us--admitted that the relief on private medical insurance had not worked very well, was expensive to administer, and had not been taken up very widely.
Mr. Gibb: Although there was a lack of take-up among people in the higher tax brackets, which is why in due course the relief was removed from them, there has been an enormous take-up among people over 60 in the basic rate tax bracket. I will give some figures in a moment.
Mr. Loughton: What we heard from the hon. Member for Redditch (Jacqui Smith) is just another outrageous version of short termism. The tax relief was introduced only in April 1990 and had hardly had a chance to get going.
Mr. Gibb: I am grateful for my hon. Friend's intervention.
Figures show that in 1990 some 400,000 individuals over the age of 60 then had private medical insurance. By last year, the number had increased to 600,000--an increase of 50 per cent. The Financial Secretary will therefore be wrong if she claims that the amendment cannot be accepted because the Opposition have provided no proof that the relief had any effect. During that period, there was no overall increase in the number of people of all ages taking out private medical insurance, which proves incontrovertibly that the relief enabled more people over the age of 60 to take out private medical insurance.
Let us deal now with the issue of cost. The hon. Member for Dudley, North (Mr. Cranston) claimed that Age Concern is more interested in improvements in the health service than in giving tax relief to the mere 5 per cent. of the population who have private medical insurance, but how will abolishing the relief have any positive effect on resourcing the NHS? If anything, it will have a devastatingly negative effect on resourcing the NHS as the Government push more people into dependency on the NHS.
According to the Red Book, abolition of this tax relief will raise £115 million. Grossed up, that figure corresponds to premiums of £500 million. If one assumes a claims-to-premium ratio of 80, as the industry does, it corresponds to £400 million of treatment costs. If one assumes, again as the industry does--and this is a conservative assumption--that if only one in three people give up their health insurance as a result of clause 17, that corresponds to £133 million-worth of medical treatment. Some people put the figure much higher, as my hon. Friend the Member for Guildford does on the basis of information that he has received.
Even if we take out of those figures the hotel costs that private medical insurance covers--they are not regarded by the industry as particularly significant--there is at best only a break-even position between what the Government will save and what they will have to spend in providing health treatment for the people who have given up their private medical insurance.
It is worse than that, however, because there is also a domino effect. As prices are increased generally for health insurance for the over-60s, more people will abandon that insurance, which in turn means that there will be fewer people to carry the burden of the risk, shoulder the costs and cross-subsidise one another. Even without the tax relief, prices will have to rise, which again means that even more people will have to leave their private medical insurance schemes.
That tallies with letters that I have received from my constituents. In my constituency, 36.6 per cent. of the population are retired and a large proportion of them have private medical insurance. They have written to me in great numbers expressing concern about the proposed abolition of private medical insurance relief. It is absurd that the Government should be introducing such a measure at a time when we are concerned about an ever-aging population and when there are increasing demands on the NHS. It is a cruel and vindictive policy.
Liz Blackman:
Can the hon. Gentleman explain why the proposal is so vindictive when the majority of taxpayers are paying twice--once for the NHS care that the majority receive and again for a relief that benefits the few?
Mr. Gibb:
It is a tax break. It is the people who take out this insurance who are paying twice--once through their own taxes, although they rarely take up any benefit from that through the NHS, and again through their private medical insurance, which is what will cover their health care as and when they need it. The figures show that the proposal is vindictive. The Government are focusing the policy on a minority who have taken the trouble to pay twice.
Let us consider the figures: 28 per cent. of all hip operations take place in the private sector, 20 per cent. of all heart conditions are treated in the private sector and 20 per cent. of all acute conditions are dealt with in the private sector. Yet the Government want to damage the private sector. That is what I mean when I say that the proposal is vindictive. It will mean that fewer people have the opportunity to have hip operations or to have their heart conditions and acute conditions treated.
Liz Blackman:
The hon. Gentleman's notion of choice and opportunity is a little skewed. The majority of taxpayers pay once to avail themselves of NHS treatment, and again through their tax contributions, part of which go towards private medical insurance relief. The point is that the majority of people do not have that choice: only the few who can afford private medical insurance--which is topped up by the many--have that choice.
Mr. Gibb:
The hon. Lady needs a lesson in mathematics, because tax relief on those premiums is worth only 20 per cent., whereas the claims-to-premium ratio is 80. Tax relief is therefore a fraction of the health care costs spent on people with private insurance who make claims to cover their treatment.
All that will happen if the relief is abolished and people leave the private sector and use the health service is that an enormous deficit will be created. The only reason why the NHS will break even rather than have a huge deficit under the policy is that two out of three people will grin and bear it and pay more. But for that fact, the policy would have a devastating impact on the NHS. The policy will not do the health service any good, however, and it will lead to a further stretching of resources. The policy is vindictive.
Only 10 per cent. of the population have taken out health insurance; yet the figures show that 28 per cent. of all hip operations and 20 per cent. of all heart operations are conducted in the private sector. As our population is growing ever older, why have the Government decided now to abolish the relief? The hon. Member for Erewash (Liz Blackman) spoke of extending choice and opportunity, but how have the Government extended choice and opportunity for people to take out private health insurance by making it more expensive?
The previous Labour Government abolished grant-aided schools, and how did their action increase choice and opportunity for people on low incomes to send their children to public and private schools? The policy resulted in more exclusive education and provided fewer opportunities for middle and lower-income people. Abolition of private health insurance relief will have the same effect. The policy demonstrates the same old vindictive Labour politics of envy and will achieve nothing, saving no money and placing a bigger and unsustainable burden on the NHS.
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