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John Mann: Having failed to intervene as many times as I wanted, I have several points to make. The blusterer from Buckingham masked the vagueness of his proposal while he meandered through alternative models of health care provision in Europe. We all know, however, that Germany takes a slightly higher percentage of gross domestic product in taxation than we do, and that in France it is 8 per cent. higher. The low taxation regime in this country and the reduction in the take from taxation contrasts with those western European models and, indeed, with the model when the Conservative party was in power from 1979 to 1997, when the percentage take increased by one third.
The hon. Member for Buckingham (Mr. Bercow) described me as an anorak—and it strikes me that anorak manufacturing might be a good small business for him to go into. While he was a special adviser—which I am sure has a lot to do with small business—some of us were taking risks in the business community, so we can speak with a modicum of knowledge. Ironically, and unfortunately for the hon. Gentleman, the first example that he gave—a three-person company—was precisely the type of company with which I was involved. Mine had similar salary levels and was set up in a similar way.
Had the hon. Gentleman bothered to listen to previous contributions or to read Hansard assiduously, he would know that the BUPA example that I used relates to a quote for the minimum cost that that organisation gave me three or four weeks ago. On average, private health insurance would impose on business a burden five times greater than the increase imposed by the change in national insurance contributions. The argument that the increase in national insurance contributions is a burden on business whereas private health care insurance would not be, is a fallacy that needs exposing. That is the American model rather than the continental model.
The hon. Gentleman used the words "pay twice". I was unable to intervene to demonstrate conclusively that the proposal is so vague that it is a case not of paying twice, but of paying somewhere between one and two times. I may be a new and inexperienced Member, but I know that the amendments that he has tabled to this important Bill are vague. They give no idea of what the payment will be, and we cannot judge what their impact on employers would be.
The hon. Gentleman compared his proposal with Liberal Democrat policies, but that raises the question: who are the official Opposition, with the Short money to do the necessary research? His flabby explanations show the paucity of his argument—and the vagueness goes even further.
When he was talking about the definition of health insurance the hon. Gentleman referred to trade unions, but he failed to explain that with most trade union health assurance policies the member pays a small amount to receive income when he is incapacitated, and in particular, when he is in hospital. Trade union policies are not about paying for private health care, but about getting payments into people's pockets when their wages are not being paid in full, or at all, by the employer.
Mr. Tom Harris: Does my hon. Friend agree that the hon. Member for Buckingham (Mr. Bercow) failed to mention that, in contrast to the spirit expressed in his amendments, even trade unions that offer private insurance do not come cap in hand to the Government for tax relief?
John Mann: Indeed, I accept that point. However, the key issue is that the health assurance whereby individuals pay a premium to get income into their pockets when they are ill has nothing to do with private health insurance. The flabbiness of the definition—by the hon. Gentleman's own admission, it incorporates all the trade union schemes—leads to this question: what is the minimum level of private health insurance that would qualify?
As we all know, there is a wide range of types of health insurance. There are some whereby health care is paid for, with various exceptions. I was reading about an example of insurance under which one third of the cost is paid, and this morning I challenged a GP in my constituency who had a leaflet about that sort of insurance in his surgery. Not all the cost is paid, and the insurance is a halfway house—or we might call it a "third way" house. It, too, would qualify. Even worse, there are policies such as the trade union assurance schemes, under which nothing is paid. The service is provided by the national health service, but the tiny amount that somebody could have in their pocket when they were incapacitated in hospital would also qualify. It seems to me that there is a potential for scam in the system.
How do we define the percentage of employers who are involved? While the hon. Gentleman was a special adviser, I found in my dealings with employers, and in industrial relations, that the vast majority of schemes were for a section of the work force, not for everyone. Indeed, it was very rare for all the work force to be covered, although the senior management were usually covered. Sometimes, as quickly happened after privatisation of the utilities, the senior management and some of the middle management were given private health insurance as a so-called perk. The question of what qualifies cannot, therefore, be dismissed by saying, "This is like the Liberal Democrats ignoring Northern Ireland, and we can get away with it because the good ladies and gentlemen from the Clerk's Department have allowed it." This should be about policy making.
Mr. Hendrick: My hon. Friend is making an important point, which the hon. Member for Buckingham (Mr. Bercow) seemed to sidestep when I intervened. If the Opposition were keen for employers to take up private health insurance for all employees, and wanted all the firms in Britain to take it up, I could see some justification for the proposed exemption from the extra 1 per cent. charge. However, the hon. Gentleman is not saying that. He is saying that just because some employers look after
some employees, it is a good idea for the Government not to ask them to make any further contributions in respect of other employees, and to encourage other companies to do the same. Does my hon. Friend not think that that is a dishonourable position?
John Mann: I think that it is a muddled and confused hedge of a position. It is an attempt to give some spin to the outside world, the business community and the financial pages of certain newspapers, but the substance is missing.
Mr. Bercow: I assure the hon. Gentleman that our position is not muddled, but his is assuredly disingenuous. Will he not honestly admit that he opposes any reduction in the national insurance burden borne by employers in respect of their employees if they choose to provide private health insurance? Can he not get his mind around the notion that, in respect of employees for whom an employer provides private health insurance, a respectable argument for a reduction in the NIC burden can be, and has been, advanced?
7.15 pm
John Mann: Like the president of the Bassetlaw chamber of commerce, I should say that I am no longer an active director or participant in my company. I am merely a shareholder, so the so-called burden on business has only one direct impact on me: a potential minimal reduction in dividends year on year. As someone who has been prepared to take forward the entrepreneurial challenge of creating 1.5 million new jobs since Labour came to power in 1997, I have no problem with helping business. From a business point of view, however, the option of private health insurance is not financially prudent. As a shareholder, rather than an active participant or director, I will press my directors never to have the poor business acumen to throw money away precisely when this Government are building up the national health service, which is growing in exactly the way that any good business would wish it to grow—so as to give us a work force who are protected in sickness and a community and future work force who are healthier overall. That is exactly the politics of this debate.
I shall finish on the precise point about national insurance contributions with which the amendment deals. It is woolly and weak. It panders to posturing politics instead of providing an alternative. I think that it is disgraceful, as was the hon. Gentleman's contribution, because it failed to address any of the specifics. The difference between paying one or two times is a grey area, where we can pick and choose in any way we want. That is a bad way of making policy and legislating, and it is a shame that the official Opposition are reduced to taking such an approach instead of making a substantive proposal.
Adam Price (East Carmarthen and Dinefwr): I shall confine my comments to amendment No. 15, which is tabled in my name alone but enjoys considerable support from Plaid Cymru and the Scottish National party. Hon. Members in all parts of the House will be relieved to know that I aim to make my comments a good deal more succinct than those of the hon. Member for Buckingham (Mr. Bercow), whose speech was not so much exhaustive
as exhausting. Nevertheless, we shall continue to support amendments Nos. 7, 9, 12 and 13, which support small business.Our position in Plaid Cymru and the SNP has been consistent with what has been—certainly for the past hour—a long and arduous debate about the Bill. We believe that the provisions are necessary, but insufficient to meet the challenge that we face in revitalising our public services. The underlying motives are correct, but the means of the achieving those aims are not necessarily provided.
Our principal concern is enshrined in amendment No. 15. The use of employers' contributions as a mechanism for delivering new investment in public services is fundamentally flawed. As the Bill introduces a payroll tax, and as the public sector is the biggest employer in many—if not all—of our constituencies, it will reduce the positive impact of the extra resources going into health and social services. It will also exert additional strain on other parts of the public sector that have so far received no definite promise of extra funds.
As has been said on many occasions, the Government are giving to the cash-starved public services with one hand, but taking with the other. That is greatly to be regretted, especially in the context of what is already a difficult financial environment for public services. It is difficult for two reasons. First, there is the growing doubt about whether the Chancellor will achieve his forecasts for economic growth. We discovered during the recess, in figures from the Office for National Statistics, that the economy has been at a standstill since autumn last year, and is therefore teetering on the brink of recession. We now have the slowest economic growth in the G7.
Secondly, while economic growth has ground to a halt, which will have an obvious impact on the ability to deliver extra resources for the public sector, inflation in the public sector is also increasing apace. As we have heard from city analysts, including Michael Saunders of Schroder Salomon Smith Barney, public sector pay and input costs are increasing faster than those in the private sector because of pent-up demand. The worry is that the extra investment promised and so badly needed will be dissipated by a combination of lower economic growth and higher costs.
I mention in parenthesis that Wales and Scotland face the additional pressures of the Barnett squeeze, of which the Committee might not be aware. That means that the rates of increase in health expenditure will be lower in our two countries than in England. The figure for England will be 7.5 per cent., whereas for Wales it will be 6.8 per cent. and for Scotland 6.3 per cent.
It is in that context of doubts about the impact on public expenditure of lower economic growth and higher public sector inflation that we have to consider the proposal to increase public sector employer contributions. Our amendment is designed to ensure that we get the full benefit of the extra resources, that we get the full force of that benefit in years to come, and that we get the resources in early. In health, for example, we are aware that it takes time to train new nurses, doctors and consultants.
It is vital that we do not impose any impediment or additional constraint through the public sector employer contribution. In previous debates, for obvious reasons, we focused on additional costs to the health service resulting from the measure. The Library estimates a cost to the
NHS in Wales and Scotland of an extra £37 million a year, and that money will come out of the NHS budget in Wales and Scotland. The cost to the NHS in England is estimated to be £205 million a year.As a result of the Bill, that outcome will be replicated in other sectors that will not receive additional hypothecated funds, and as an internationalist I should point out that it will be replicated in England as well. For example, next year the further education sector in England will probably receive an additional £85 million, which is similar to this year's funding increase and represents about 2.5 per cent. extra in its annual budget allocation. However, according to the Department for Education and Skills, £25 million of that £85 million will be eaten up by the national insurance employer contribution increase, and because of additional charges for utilities and various other equipment costs, a further £25 million to £30 million will be needed simply to achieve a real-terms standstill.
That will leave a maximum of £35 million to cover pay increases, which will mean a pay award in the sector of only slightly more than 1.25 per cent. That is less than the headline inflation rate, for which the latest figure is 1.5 per cent., and far less than the average wage increase throughout the economy as a whole, which is about 4 per cent.
That will happen in a sector that is already experiencing considerable difficulties with pay agreements and pay differentials with teachers—and the problems in further education will be mirrored in secondary and higher education. Local government is experiencing similar problems: the Labour chair of the Local Government Association, Jeremy Beecham, has said that 80 per cent. of the additional money going into local government for social services will be eaten up by the increase in local government employer contributions alone.
That is why we, through our amendment, are attempting to provide some insulation for the public sector at a difficult time. We acknowledge and welcome the fact that in the Bill the Government have taken two steps forward, by recognising the need for extra investment and the need for taxation to fund it. Unfortunately, for two small steps forward they have taken one step back—or, as the accident and emergency consultant Peta Longstaff said during the post-Budget photo-opportunity for the Prime Minister and the Chancellor, the Government have scored an own goal by providing additional resources with one hand, but taking a substantial amount back with the other.
Unfortunately, by raising national insurance contributions as they have chosen to do, the Government have raised expectations but simultaneously limited the ability to deliver on them. Despite the long debate that we have had, it is inevitable that we will have to revisit the subject because of the hole in the Government's finances and the inconsistency in their thinking. We will have to continue this debate until we get an adequate solution for the public sector—one that does not give with one hand and take with the other.
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