The NHS has supposedly had its funding ring-fenced by the government. But we now know that's not really true. Demand is rising and so are real costs. Effective budgets are falling, as even the IFS has now noted.
The choice available is a blunt one because belief in the possibility of massive efficiency gains is myopic. The reality is we either find more money or health care outcomes will get worse. That's not rocket science; that's fact.
I will not argue for worse health care outcomes. I do question some policies (preventing heart disease forever simply, and inevitably, guarantees more uncomfortable deaths from cancer, for example). But generally, it's a brave person who says we can live with increased risks and feel comfortable with doing so.
In that case cash is needed. This is not the moment to suggest a detailed programme for raising that moeny, but one idea I put forward to the meeting I was at on health and tax justice yesterday was simple. We could charge VAT on private health care. If we did HMRC says we'd raise just over £2 billion in extra funding.
I call that a no brainer. It's affordable by those who would pay. It's an exemption that is not needed. It's a tax that could redirect resources to meet need. Let's start debate there.
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Richard, you are making two mistakes here. First, the exemption is for private and public health services – given there is no right to deduct input VAT, some of that £2bn will represent medical services supplied to the NHS. Second, the exemption is a function of EU law, and cannot be changed without a unanimously agreed amendment to the VAT Directive. It must be doubtful that any change would be accepted by other EU member states, particularly those (like France) where healthcare is not centrally provided and payments by patients are much more important.
There is considerable room for manoeuvre on this in EU law – that is not an issue
And yes – the exemption covers both
But actually, the NHS can (and / or should) recover VAT, like local authorities can. They can recover because they do not make supplies of their services for VAT purposes
So the estimate is just an estimate – and not mine? So what? The principle matters
As private healthcare is generally provided by insurance companies, the other option would be to make it liable to higher rate IPT (which is the same as the VAT rate).
I don’t know why you think there’s any room for manoeuvre re. taxing primary healthcare – the ECJ has been quite prescriptive even in relation to secondary healthcare services. See e.g. the Kugler, Dornier, Ambruminel and Lu cases. The Directive and caselaw are clear. This is not controversial or difficult.
My other point was that the estimated figure is for healthcare across the private and public sectors. You have wrongly assumed it relates to private healthcare only – it does not, and HMRC do not present it as such. So, for example, it includes the exemption that will apply where a GP practice provides services to its local PCT. There may be a breakdown somewhere of the figure between public and private healthcare, and this is what you’d need to look at.
The 2009 market was £5 billion http://www.oft.gov.uk/shared_oft/market-studies/OFT1396_Private_healthcare.pdf
The estimate ignores some oncosts and private sector drugs
It is likely to have grown
I think the loss is largely due to the private health care market
The EU has a policy of breaking down exemptions
It seems very well covered here:
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000121&propertyType=document
This is a little silly. First you say the exemption can be scrapped. Then you acknowledge EU law but say there’s room for manoeuvre. Then you say the EU has a policy of breaking down exemptions. This isn’t really right either. The Commission would certainly like to scrap exemptions and reduced rates on such things as books, childrens clothes, heating etc, but unanimity of the member states is required to amend a Directive and this looks highly unlikely. There has been no suggestion of scrapping the healthcare exemption and, for the reason I mentioned above, it’s most unlikely the French and others would accept this.
The logic of your position is that the EU shouldn’t have the ability to constrain the UK’s taxing rights in this way, and I’d agree. But it’s unhelpful for you to give the impression that the UK is free to change the VAT rules unilaterally – because it just isn’t.
But movement in this direction is welcome to the UE
And as others have noted, the net result can also be achieved via insurance taxes if needed
That is certainly a more realistic proposal (although the prevalence of self-insurance in the corporate market means that you would only be taxing smaller companies and individuals).
As a general point, and I’m trying to say this to be helpful, you seem to under-estimate the constraints EU law puts on the UK’s ability to tax. May be worth you looking into it further, as it’s a significant problem for tax policymakers.
I spend a lot of time in Brussels
I am well aware of this issue
Then why do your various policy suggestions never take account of EU law?
They do, often
example?
All my work on the Code of Conduct and savings tax directive
And for the as& D group
The list could go on and on
Just because certain medical services are exempt does not mean no VAT is charged.
The exemption is applied to the charge to the final consumer, not to the input VAT on services, transport etc (which then cannot be reclaimed or deducted).
A zero rate would be a better deal!
It´s also worth noting that once a VAT charge is imposed, it cannot be reduced below 5%.
Consider that EU fraud on VAT is running at some 12% of revenue collected; approximately.
The UK wouldn’t need private health. If the people turned up to appointments, then there would be the room for people. They don’t, they miss them. Therefore we need private health care in the UK. Until they stop wasting time, we will need it.
Let me tell you what happens when someone does not turn up
No time is wasted
People do not sit around
They catch up with their work so they do less unpaid overtime
That’s what happens
And somebody somewhere goes without seeing a doctor.
Oh, and you talk about unpaid overtime on those salaries? How many people on same level of earnings do overtime without compensation? Welcome to the modern world. Our local doctor actually closes at 3pm twice a week so they can do admin. Brilliant!
I gate to say I don’t believe you re closing but I don’t
GPS have a contractual duty to provide cover from 8 until 6.30
If they don’t please don’t moan, go to your CCG
If they all turned-up for their appointments, there would be more waiting. Never known a doctor do many 10-minute appointments in 10-minutes!
Don´t forget, NHS hospitals are now allowed to source 49% of their money from private sources.
Some now have separate waiting rooms for paying patients!
Have the government write off the ridiculous PFI agreements imposed on hospitals. Get rid of private health companies leeching off the NHS as well.
Those measures should free up considerably more than £2 billion to re-invest into the NHS.
Of course, it won’t happen, but it should!
That would mean breaching contracts deliberately written with onerous clauses, it will cost.
And would mean the NHS would need more contracts with more people to maintain the institutions. PFI covers more than the buildings, also the contents.
You should read the WiKi page on it.
What a mess.
http://en.wikipedia.org/wiki/Private_finance_initiative
“That would mean breaching contracts deliberately written with onerous clauses, it will cost.”
Then it will cost! The government could pay for it in the same way that it props up the banks – namely by buying the PFI debt. Getting out of these contracts will undoubtedly cost, but getting out from under them will make the NHS cheaper to run in the longer term.