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Dr. Evan Harris: The hon. Member for Buckingham (Mr. Bercow) is a pleasant and eloquent man, but it is a pity when he speaks as he did when moving the amendment, because to speak at such length causes us to have a far more diffuse debate than we might otherwise
The hon. Member for Buckingham made significant points about his concern for certain businesses, and there are points of principle that should be addressed, especially those that relate to tax relief for businesses that pay for private health insurance. I hope that he will respond to some of the points that I make in that respect. The hon. Member for Bassetlaw raised some practical issues that make it difficult to see how such a system could work, but it is worth exploring the matters of principle as well.
If their amendment reflects the approach that the Conservatives have chosen to adopt, they have to say where it will end. It is reasonable to ask whether, if an employer decided that to attract highly sought-after staff who are often highly paid they would offer a contribution toward fees for private sector education, the hon. Member for Buckingham would advocate that there should be some remission of or exemption from income tax or corporation tax, which comprise the general pot out of which education funds are paid. Similarly, if an employer decided to give sick pay provision that was more generous than the basic statutory package, would he say that the employer should benefit from a reduction in tax on the ground that they should not pay twice for statutory sick pay provision that is paid for by the state through taxation? If a person did not use local schools or had long-term care insurance, should that person receive a deduction or relief on their council tax payments?
I contend that it would be difficult to argue both that the answer to those questions is yes and that we would still have a fair system wherein the better-off are engaged in state provision of a welfare safety net. If one believes that people should not pay twice, the better-off will be even more reluctant to pay tax at all and might be tempted to plough their own furrow, and that will undermine the tax base for important public services. That is an issue of principle, and it is important that the Conservatives make it clear whether that is to be their general approach.
In a similar vein, if a company did not provide a benefitprivate health insurancefrom its receipts, it may well be that it would pay tax on the money it used to do so. ThereforeI do not mean this in a derogatory waythe company might use the Conservatives' proposal as a way of avoiding paying a different tax. A relief on such a use of employers' funds might amount to a relief that is soughtor already achievedby not paying a certain amount on profits or dividend payments.
As the hon. Member for Bassetlaw said, the extent of insurance is variable. In an intervention when the hon. Member for Buckingham was in full-on mode, I tried to make the point thatto use his termsan employer pays private health insurance to ensure that their employee is available to work and doing so therefore contributes to their business. However, people who are off work sick often use primary health care provision or emergency provision, which are never covered by private health insurance schemes, or they may suffer from chronic illness, which is often not covered by private health insurance schemes. In that case, why should there be full relief?
Imagine two employees who are using an emergency servicean NHS intensive care unit or ambulance provision. One does not benefit from private health insurance, the other benefits from private health insurance outwith the particular health incident that has caused them to use the emergency service. If both employees are using the national health service, why should only the latter's employer receive some benefit? There is therefore a problem with this approach.
There is also an issue about fairness. Some firms provide private health insurance for all their employees from the cleaners upwards, but generally speaking, the hon. Gentleman will accept, private health insurance is a perk for the better-paid. He is therefore proposing a subsidy for people who are better-paid; it would not be directed at people on average pay or those who are less well-paid.
The hon. Gentleman may argue that his amendment provides an incentive that would encourage people to take out private health insurance; they would get the benefit of tax relief so, in some way, the amendment may reduce the pressure on the NHS. He did not make that point, but a similar point was made earlier about tax relief for better-off pensioners. However, he will know that elasticity in demand for private health insurance has not been demonstrated. Between 1990 and 1997, when tax relief for private health insurance for better-off pensioners operated, there was not a significant increase in the take-up of private health insurance so, if that was one of the aims of the hon. Gentleman's policy, it will not be delivered. He must deal with significant issues of principle; it is unfortunate that during such a long speech we were not able to intervene and invite him to comment on them.
The hon. Gentleman made some valid points about the burden of taxation on small businesses in amendments Nos. 7 and 9. He knows that I share his concern, which is why I should have preferred a tax rise for high earners with an income of more than £100,000 to a tax on employers, especially in small businesses, where the average take-home pay is £13,000 after, as he almost conceded, accountants' adjustmentsthat may not be a genuine figure for take-home pay. Nevertheless, I share his concern and I cannot understand why he does not feel that it is fairer to ask wealthy people earning more than £100,000 to pay more.
The hon. Member for Christchurch (Mr. Chope), described 50 per cent. tax rates on income over £100,000 as obscene, which was the strongest term used by Conservative Front Benchers today and shows an imbalance in priorities; they are seeking to defend the better-off from what the hon. Member for Christchurch described as an obscenity rather than seeking to defend people who cannot get the health service that they need because of lack of funding. I return to the point that I made at the beginning of this afternoon's debate; the hon. Member for Buckingham is effectively offering tax cuts in his amendment to various parts of the business community. He did not say how he would pay for them, although he tried to explain why he did not do so; as yet, he does not have a policy to put before the electorate.
Mr. Hendrick: I certainly agree with the hon. Gentleman's criticisms of the Conservative position. However, does he not agree that his own policies of clobbering people on more than £100,000 with a 10 per cent. increase
Dr. Harris: The Conservatives must explain how they will pay for their proposal. In the previous group of amendments, we made clear the way in which we would have preferred to raise the money. However, having failed in our attempt to achieve that fairer method, we now face the question of whether the money should go to the health service or whether there should be tax relief for businesses. While we sympathise with businesses which have problemsthe hon. Member for Buckingham knows that we share his view about the iniquity of IR35, on which our Treasury spokespeople have campaigned alongside his colleaguesfunding has to go to the health service, which is why we cannot support his suggested tax reliefs.
Finally, the hon. Member for East Carmarthen and Dinefwr made some good points when speaking to his amendment. To a certain extent, using employers' national insurance contributions is self-defeating, particularly when social services departments have to pay more than they may get from the Government's disbursement of the receipts, which is why on Second Reading we said that it is vital that more of the money raised by the Bill goes to social services than is planned by the Government, otherwise they may not get any benefit and, indeed, are in danger of getting a net disbenefit. That situation has been created by the underfunding of other public services; we are robbing further education and police authorities, for example, to pay for the health service, which cannot be right. The Government should not look at each public service in isolation, but should recognise that there is still underfunding across the board. They should raise their ambitions for getting resources into public services fairly and announce changes, preferably before an election, to income tax. We therefore share the view of members of Plaid Cymru that income tax is the best way to pay for increased funding. The Government have missed the opportunity to tackle all those services, but it is not appropriate to go into that now. However, we cannot support the Conservative amendment.
Dawn Primarolo: The hon. Member for Buckingham (Mr. Bercow) took 55 minutes to introduce his amendments. While they are important, I hope to be a little briefer in my response to them and amendment No. 15, which was tabled by the hon. Member for East Carmarthen and Dinefwr (Adam Price).
I shall deal with the amendments in the order in which the hon. Member for Buckingham introduced them. Amendments Nos. 6 and 8 cover private health care. The hon. Member for Oxford, West and Abingdon (Dr. Harris) and my hon. Friend the Member for Bassetlaw (John Mann) made some good observations about the
The amendments are interesting, as was our debate and the enthusiasm with which the hon. Member for Buckingham introduced them. The House will realise that they provide the first hint of the Conservatives' intentions for the NHS and propose little more than a thinly-veiled subsidy for companies offering private medical insurance to their employees. That is not the most efficient way of trying to support the NHS indirectly, and it is certainly expensive. As the hon. Member for Oxford, West and Abingdon said, when the Conservatives introduced relief on private medical insurance for people over 60, between 1990 and 1997, there was precious little growth in the number of people who took out such insurance, although it cost the Exchequer £650 million. If we look carefully at the way in which companies operate, we see that private medical insurance is provided as a benefit; the company pays for a company policy, which usually means that large employers can negotiate such policies for groups of employees at a discount, whereas smaller companies cannot. The amendment would therefore help some, but not all, employers.
The Government reject the basic proposition that companies should receive payment for providing private health care. If companies decide to provide private medical insurance for their employees that is up to them, but the Government do not believe that the taxpayer should subsidise them for providing such insurance. We remain convinced that the best way to use the resources available is to provide for the health care of all residents in the United Kingdom by funding the NHS directly.
About 120,000 employers are already providing private medical insurance to about 1.9 million employees. They do that in the knowledge that they are still making as well a contribution to the NHS through employers' national insurance contributions. They have never suggested that because they are providing private medical insurance there should be a reduction in national insurance contributions. We know, because employers have repeatedly made the case, that they have a strong interest in a healthy labour work force. The CBI has made it clear that it is important to companies that they have an efficiently funded NHS to which their employees have access, a service that is comprehensive and available on the basis of need.
The hon. Member for Buckingham referred also to fairness. He talked about costs to employers. Let us take employer contributions to health care benefits for the year 200001. In France, an average employer will contribute about £58 a week. In the United States, it is £37.50. In Germany, it is £31, and in Britain, it is £9. Nine pounds contribute to a comprehensively available health service on the basis of need. The system ensures that employers get an extremely good deal.
The hon. Gentleman moved on to the self-employed when dealing with amendments Nos. 7 and 9. They are designed to help small unincorporated businesses. My problems with the amendments is not necessarily the intention that lies behind them, but the suggestion that contributions would not be made to the health service.
The Government have demonstrated time and again their ability to assist these very businesses, whether it be through reductions in the threshold for the reduced rate of national insurance or in helping the self-employed and service companies in taking forward their business. However, the amendments would give the self-employed further benefits in a system that would cost the taxpayer £450 million, and would give self-employed companies a greater benefit than they already have.
If we compare the national insurance contributions paid by the self-employed with those paid by employees and employers, it is estimated that the self-employed already under-contribute by about £2.4 billion. That figure takes into account the fact that the self-employed would have a reduced benefit position. The self-employed are already getting an extremely good deal from the national insurance fund. The hon. Member for Buckingham seeks to make everyone else pay for the service while suggesting that the self-employed should not.