Labour’s PMI insurance tax election pledge won’t work

Labour’s election pledge to increase Insurance Premium Tax to 20% for private healthcare insurance to end NHS car parking charges is wrong.

The policy is morally and economically bankrupt – and would actually pile more pressure on an already struggling NHS.

This Labour policy would be disastrous for the UK‘s population as it would force many ordinary people to cancel their hard-earned private medical insurance (PMI) and rely solely on the NHS.

What adds to the irony is that this is a party who wants to govern for the many, and not just the few. This is a laudable principle. Except that the IPT pledge on PMI is clearly ideologically driven and would be difficult to enforce in practice.

To provide some context to my argument, ahead of the forthcoming UK election on 8 June, Labour has said, if elected, it will make parking at NHS England hospitals free for patients, visitors and NHS staff.

In a statement, Labour said it will: “Increase the rate of Insurance Premium Tax to 20% for private healthcare insurance products to fund the policy, replacing the £162m England’s underfunded hospitals currently raise from car parking charges by scrapping the subsidy for people that can afford it, rather than charging people who can’t.”

Labour said a recent freedom of information request by Unison has revealed that some hospitals are charging staff, including nurses struggling with low wages, nearly £100 a month to park, resulting in reports of nurses having to rush out in between appointments to move their cars and avoid fines.

“An abomination”

Speaking to Life Insurance International (LII) publication,Stuart Scullion, chairman of the Association of Medical Insurers and Intermediaries (AMII), has called the Labour policy announcement “an abomination”.

Scullion said Labour’s election pledge was “a false economy” because it would increase, rather than alleviate, the burden on the NHS.

He commented: “With every increase in IPT in the last 18 months, we have a seen a disproportionate number of people cancelling PMI. This means those people will have to rely on the NHS.”

Since November 2015, the Association of British Insurers (ABI) has said three successive Government rises will have doubled the rate of IPT by June this year from 6% to 12%.

Scullion stressed: “One of the biggest reasons people cancel PMI is that they are not super-rich or affluent.”

In Scullion’s view, an effective way to alleviate the burden on the NHS would be to re-introduce tax-breaks on healthcare.

Reacting to the Labour IPT election pledge, an ABI spokesperson said: “Private medical insurance and cash plans cover around four million people in the UK from all walks of life. People who are treated privately through medical insurance free up room for others to access treatment earlier, helping to cut waiting times and reduce pressures on the NHS.

“Recent changes to the discount rate for compensation will cost the NHS over a billion pounds a year, roughly ten times the revenue raised through hospital car parking charges. Tackling this would be a better way to help the NHS save money.”

Commenting on Labour’s IPT policy announcement, Patricia Davies, head of insurance at research and consulting firm, GlobalData said: “PMI is a luxury so an increase to 20% would turn a lot of people away.  Assuming this is applied to Group PMI too – then it’s another hit for businesses who can’t afford for their employees to be off sick for long periods of time. At the end of the day, PMI saves the NHS a lot of money.”