Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 5:56 pm on 25 April 1989.

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Photo of Mr Chris Smith Mr Chris Smith , Islington South and Finsbury 5:56, 25 April 1989

My hon. Friend has raised an extremely important point that we shall want to consider in detail in Committee.

Clauses 51 to 54 deal with tax relief for medical insurance. My right hon. Friend the Chief Secretary said that in some ways the debate on the subject had been inflated out of all proportion. I have major reservations about the introduction of such a tax relief. I have read the submission of the Royal College of Nursing, which many hon. Members received today. I sympathise with the view that if £40 million is available, it would be better to spend it on the National Health Service. There are good tax reasons why this would not be a sensible change to make. I believe strongly in having as wide a tax base as possible and, therefore, rates of tax that are as low as possible. Before we introduce a new tax relief such as this, we need the clearest possible evidence that it would be effective and that the change is genuinely needed.

We are told that when the change is introduced in 1990–91 it will cost £40 million. Almost all of it will be a deadweight cost. In other words, the relief will go to people who are already making those payments without tax relief. The Red Book says that the Treasury has assumed that in 1990–91 the number of people paying premiums, as a result of the relief, will rise by 10 per cent. I do not believe that that is a sufficiently large percentage; if it were a much larger percentage, there might be some justification for it. I do not believe that the case for the new relief has been proved. It sets an unfortunate precedent.

All hon. Members have received representations from constituents who believe that there ought to be tax relief on the cost of commuting into London. The only result would be that people would move even further out of London. We have also received representations about tax relief on the cost of private education. The same argument is used—that it would relieve the pressure on the state-maintained education sector.

I am all in favour, of course, of allowing people to make a choice whether or not they use the National Health Service, but I have never understood the argument used by the Leader of the Opposition, who complains that the Prime Minister does not use the NHS. Anybody who does not use it is obviously relieving it of a certain degree of obligation and a certain amount of work.

It is quite another thing to take a further step and to use taxpayers' money—because that is what it is—to give one group special relief. Not only could we give this £40 million to the NHS, but we could give it to all retired taxpayers rather than discriminating. I do not believe the case has been made, but of course there will be a major debate on this in a couple of weeks' time, and we shall be able to explore the arguments more fully. I look forward to hearing what my hon. Friends have to say to support this in rather more detail.

Finally, I make it clear that, subject to that one proviso, I support this Finance Bill. I support all the measures in it. Many of them have been welcomed, particularly those which help old people and charities. Many of them make further changes which will help the performance of the economy. I therefore support Second Reading.