A call to make insurance premium tax (IPT) exempt on all healthcare insurance products has been made to The Chancellor of the Exchequer at the CBI dinner in Manchester tonight attended by 300 business leaders.
Sue Weir, chief executive of Medicash, a leading UK healthcare cash plan provider, made the call following the massive increase of 58% in the IPT rate from 6% to 9.5% which came into force on 1 November as a result of the Chancellor’s post-election Budget in July.
In a frank address, Weir stated that the unprecedented hike in the tax could substantially damage healthcare in the UK. There are circa 6.5 million people with health cash plans and private medical insurance. If individuals and companies are driven away from making their own healthcare arrangements due to rising and uncertain tax levels there will be significantly greater demand on the already cash and resources strapped NHS.
She said, “The Government is looking to improve productivity rates within businesses so this seems to be a complete anomaly. Businesses should be encouraged to offer healthcare insurance to their employees not put off from doing so by adding a tax uplift. Business productivity across the UK will be affected as absenteeism increases due to health issues have a negative impact on the long term economic wellbeing of the nation.”
As Neil Carberry, CBI Director for Employment and Skills, has said “Investing in the wellbeing of employees is not only the right thing to do, it has real business benefits.”
Weir continued, “IPT is currently a very low profile tax, hardly ever talked about and rarely on the public and media’s radar. How many people actually know of its existence let alone what it is? Yet this tax affects most individuals, families and businesses in the UK. It has been raising over £3bn for HM Treasury each year prior to this latest hike, which the Government estimates will raise an additional £1.75bn revenue per annum. However, its estimates will prove to be a lot less if businesses move to IPT exempt solutions, which the larger employers could do, and individuals just stop paying for their own private healthcare products altogether. Economically the tax on healthcare insurance makes no sense as the sums just don’t add up.
“Life insurance, permanent health insurance (income protection) and all other ‘long term’ insurance are exempt from IPT and healthcare insurance products must be included in that category.
“Also, it is inappropriate to compare motor insurance, a compulsory purchase if you wish to stay on the roads legally, with an optional type of insurance that people and employers may choose to buy which focuses on health and directly supports the NHS.
“My big fear is that IPT could eventually end up being one of those taxes that is easy for a Government to increase every year like duty on alcohol and cigarettes, causing even greater reductions to the number of healthcare insurance products purchased year on year.”
“Simply, healthcare insurance products should be in the same category as the other ‘long term’ insurances such as life and permanent health insurance and we urge The Chancellor to make the necessary change to benefit the NHS, employers, employees, private individuals and families for financial and resource reasons.”
Healthcare intelligence provider LaingBuisson stated in August “demand for private medical cover moved down in 2014 despite a growing economy with record employment levels… future prospects for market growth are also dented with the unwelcome sharp rise in IPT set to knock the sector in November this year.”