Lord Kinnock's £2bn VAT raid would crush the NHS

Telegraph

4 days ago

Every now and then, the ghost of a politician past makes an appearance, as if to carry out the public service of reminding us that terrible leaders aren't a blight unique to our generation.
Last week, Lord Kinnock urged the Chancellor to launch a VAT raid on private healthcare. The former Labour leader claimed the policy would raise £2bn in 'vital funding for the NHS and social care'.
He said that 'many people are turning to private healthcare, not out of choice, but because they cannot afford to wait'.
Many people are indeed turning to private healthcare, Lord Kinnock is right about that. He also correctly identifies the reason behind this being the long waiting lists, which have now become a permanent feature of the NHS.
But, remarkably, he arrives at a diagnosis which would considerably worsen the situation.
It was reported last year that almost half of 18- to 24-year-olds are opting to pay for a GP appointment in order to beat the waiting list on the NHS, with the total number of people going private to see a GP approaching four million.
There has also been a 30pc increase in the number of people paying privately for hospital care across the UK, according to data released by the Nuffield Trust.
This is happening, we are told, despite record levels of staffing and greater levels of funding within the NHS.
In June, the Government entered an agreement with the independent healthcare sector as part of its plans to end the hospital waiting list backlog.
Some of the statistics released at that time bring home the scale of the crisis in the NHS from across departments – in gynaecology, there is a backlog of 260,000 women waiting more than 18 weeks for treatment, while in orthopaedics, 40pc of patients were waiting longer than the 18-week target.
All these figures point to an NHS that is failing to cope with the nation's healthcare demands, and is relying on the private sector to lend a helping hand both at the general and specialist care levels.
How on earth, then, would slapping VAT on private healthcare help the struggling NHS? It would make it more expensive and price out many of its current customers, as at least some of those people would return to the NHS's burgeoning waiting lists.
Every taxpayer who takes themself out of the NHS and into the private medical market already pays twice for the service. Once through their tax bill, and once through their private medical bill or insurance.
On top of that, there is insurance premium tax to be paid on private healthcare, which last year brought in over £2bn for HM Revenue and Customs.
Questions have also been raised around the veracity of the £2bn carrot which Lord Kinnock is dangling in front of the Chancellor as he pushes his VAT policy. For that amount to be raised, the tax would have to be levied on the use of private opticians and dentists, the latter being a service which the NHS is notorious for failing to provide.
Tax expert, Dan Neidle, has suggested that the policy might in fact lose the Treasury money. It is businesses which pay for most private healthcare in this country, through providers such as Bupa, which currently do not charge VAT, nor do they recover their own VAT costs.
But with the exemption scrapped, explains Neidle, businesses would be able to claim back the VAT on the provision of private healthcare, and providers could in turn reclaim their own VAT costs from the Treasury.
People who ease the pressure on the perpetually ailing NHS by paying for private medical care out of their pockets should be incentivised to carry on doing so through tax deductions – not punished by higher taxes.
And any VAT raid would backfire on the entire population by worsening the pressure on the state-owned healthcare system.
Desperate as Rachel Reeves is for revenue-raising ideas, if she doesn't want her legacy to be the destruction of the NHS then she must stay clear of yet another disastrous VAT blunder.