Fears Labour will make private healthcare its next VAT target if party wins power | Personal Finance | Finance
The Tories and tax experts say Labour could look to add VAT to the cost of private healthcare as well as private schools.
It is claimed the move could raise anything between £550 million and £1.5 billion a year to fund a black hole in the nation’s finances and help rebuild the NHS.
Currently, private health policies carry an insurance premium tax (IPT) which is set at 12 percent and could – in theory – be brought into line with VAT at 20 percent.
Speaking at a rally earlier this week, Boris Johnson, claimed a Labour agenda would involve a series of tax hikes “racking up taxes on pensions, on property, persecuting private enterprise, attacking private education and private healthcare”.
Labour’s Shadow health secretary, Wes Streeting, has previously said there are “no plans” to introduce VAT on private healthcare.
However, finance experts say it remains “perfectly possible” given the precedent set for private education.
Brian Walters, of insurance broker Regency Health, said: “Jeremy Corbyn proposed to increase this (IPT) tax from 12 percent to 20 percent in the run up to the 2017 general election and, although this hasn’t been reprised by Keir Starmer, there is a worrying parallel with Labour’s private-school policy.”
Scott Harwood, of accountancy firm RSM, told the Telegraph: “Given the similarity in demographics, the Labour Party might look at private healthcare in the same way they view private schools.”
Currently, the Treasury raises around £825m through IPT on health insurance, according to RSM. It estimates raising it from 12 percent to 20 percent would bring in another £550 million, however there are some suggestions the figure could be as high as £1.5 billion.
Mike Warburton, former tax director at Grant Thorntons, said VAT on private healthcare or a rise in IPT were both “entirely possible”.
However, any such change would bring huge political risks given far more people use private healthcare than educate their children at private schools.
William Laing, of healthcare data provider LaingBuisson, said: “Only 7 percent of people are privately educated. But for private healthcare, it’s around 20 percentc. So they would alienate a lot of people if they did.”
