Labour’s Lord Kinnock: Slap VAT on private healthcare
Labour’s Lord Kinnock has called on the government to start charging VAT on private healthcare providers in order to raise funds for the NHS.
Speaking to the i Paper, the former Labour leader has urged Rachel Reeves to include in the upcoming Autumn Budget similar VAT changes for the private medical market as those applied to private schools.
Kinnock suggested that removing the VAT exemption on private healthcare would provide “vital funding” for public services and be “widely supported” by the public.
The paper quotes an analysis suggesting that if this tax structure were changed, it would raise more than £2 billion for the Treasury.
However, laying out in a LinkedIn post, tax expert Dan Neidle stated that “It’s not just fancy private hospitals. Opticians. Dentists. Osteopaths. Scrapping the VAT exemption means the cost of all of these go up. Most of the public would be affected.”
“And some of the £2bn will be private services supplied to the NHS. Currently exempt; but if VAT is added that’s an extra cost for the NHS,” he added.
‘Unequal access to care’
“After 14 years of underinvestment, many people are turning to private healthcare not out of choice, but because they cannot afford to wait. This has increasingly led to unequal access to care,” Lord Kinnock stated.
The surge in demand for private medical insurance policies has been well-documented, with the latest figures from PHIN revealing that in Q3 of 2024, private hospital admissions reached their highest rate in the third quarter of any year.
This comes as the waiting list for planned hospital treatment in the NHS has a backlog, as of May, that stands at over seven million cases.
To reduce waiting times, Health Secretary Wes Streeting has been vocal about utilizing the private health sector to alleviate pressure on the NHS waiting list.
Back in January, Reeves announced in her Spending Review a £29bn funding package to boost the NHS, which included up to £10bn for technology and digital transformation, as well as GP training.
However, last week, the NHS and the government grappled with a doctors’ strike.
Lord Kinnock’s calls come on the back of Reeves’ revoking VAT exemptions on private schools in her first Autumn Budget, a move that resulted in legal action and multiple school closures.
ABI hits back
The insurance industry has hit back at the former Labour leaders calls to revoke the VAT exemption on healthcare providers.
Speaking to City PM, an Association of British Insurers (ABI) spokesperson said: “At a time when the government is looking to promote the role of health prevention and reduce economic inactivity, we would be concerned about the introduction of any measures that might create a barrier to health support.”
The spokesperson for the body that represents over 200 insurers pointed out that he insurance sector and independent health services “have a vital role to play in supporting a healthy and productive workforce as well as helping to reduce pressure on the NHS.”
“Many people have access to preventative services through their workplace that help them stay well and in work, or treatments that can help them return to work sooner after illness,” they added.