Withdrawal of Relief on Medical Insurance Premiums

Orders of the Day — Finance Bill – in the House of Commons at 4:11 pm on 16th July 1997.

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Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry) 4:11 pm, 16th July 1997

I beg to move amendment No. 13, in page 11, line 15, leave out from "section" to end of line 16 and insert shall not take effect until Her Majesty's Government has published a study of the additional National Health Service spending required to accommodate the extra patients resulting from the consequential cancellation of medical insurance contracts".

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

With this, it will be convenient to discuss amendment No. 14, in page 11, line 15, leave out from "section" to end of line 16 and insert shall not take effect until Her Majesty's Government has published an assessment of the effects of the withdrawal of this tax relief on National Health Service spending in 1997–98,1998–99 and 1999–2000.'.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

The amendment would defer the implementation of any Budget changes to health insurance until a full appraisal of their impact on the national health service and its waiting lists had taken place and been published by the Government. I am bound to say that such an appraisal is sorely needed. I will deal in due course with some of the evidence that I have on the matter, but we need an authoritative Government statement, in particular, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who is on the Front Bench beside me, has been labouring hard to ascertain some of that material from the Treasury by way of written questions. He has received a number of holding answers on relevant matters, but he has not received the substantive answers. It is regrettable that we did not have the information before this afternoon's debate.

I should at the outset declare an interest in that I have been a member of BUPA for a large number of years. Despite any appearance to the contrary, I do not yet qualify by virtue of age for any tax relief. My mother, on the other hand, is also a member of BUPA, and she does.

In certain respects, this debate mirrors yesterday's debate on mortgage interest tax relief, yet there is a subtle difference in the Government's approach to the two. It is a difference in the scale of the potential revenue. The mortgage interest revenue being discussed yesterday was about £950 million in a full year. By 2000, the revenue gain from the withdrawal of this relief will be £140 million. There is, however, a considerable and significant difference in impact.

Yesterday, we sought to advance the argument that the Government's proposals on mortgage interest would have a widespread effect. After all, there are more than 10 million mortgagors. In contrast to that approach, which I have occasionally described as saturation bombing, today involves precision bombing on a much smaller number of potentially affected persons, including those who are often least well equipped to fight back in the argument. I shall return to numbers and the impact of the proposed changes later.

If my tone is a little quieter than it was last night, it is because we would all do well to reflect that those who are likely to be affected by the proposed change have generally made a great part of their lifetime's contribution to society through their work, through voluntary work, through raising their families and through many other endeavours. When they write, they often state that they had front-line experience of the second world war and experienced times of real difficulty. They grew up through that.

In many cases, including that of my mother, we are talking of people who have relieved the national health service of costs over many years through their membership of private medical insurance schemes. It is worth saying also that they are not generally candidates for some fairly familiar procedures for younger people. For example, they are not candidates for cosmetic surgery on the NHS, nor are they candidates for orthodontia or the repair of sports injuries. Their cases typically—I use my words delicately and I hope that they will not be misinterpreted—involve the more degenerative conditions such as cataracts and the need for hip joint replacements.

Both in the NHS and the private sector of health care, the expectations of society have changed massively over the past generation. People expect to have cataracts and problems with hip joints rectified. They expect the machinery to be in place to enable them to have operations so that they might maintain or enhance their quality of life.

It is a striking fact that almost half of all health expenditure in the United Kingdom is on persons over the age of 65. In 1966, 16 per cent. of our citizens came within that sector of the population, but we look forward to the greying of the baby boom generation and, over the next 25 years, the proportion will increase to 18 per cent. The impact on the target group and, I concede, on potential savings, will increase commensurately.

It will be clear to all of us who were in the Chamber to hear the exchanges following the private notice question that the health service is under severe funding pressure. The Government, as the Secretary of State for Health admitted, are struggling to contain waiting lists. Perhaps it is not for the Committee to debate why that should be and who gave the impression that they had a magic answer during the general election campaign, but the Government promised to reduce waiting lists, and they, have offered no extra current spending to meet the problems of the health service.

In the context of an aging population and the demand for better health services and rectification of diseases linked to aging and degeneration, the Government's proposals, as set out in clause 17, are characteristic of their general approach to the Budget. They reveal some of the besetting sins that we discussed last night in respect of mortgage interest relief. First, there is haste. Haste has curtailed the reasonable representations—indeed, the time for hon. Members to consider those representations—of responsible outside bodies on the matter and, perhaps more regrettably from the Government's point of view, led them into error. It has not been in their own interest to rush this measure. Indeed, the Association of British Insurers made the point that it would be prepared to consider phasing out the relief, but it does not want rushed changes implemented in a Budget with immediate effect from 2 July. I shall come to the specific points about that in a moment.

Haste is the first problem. The second problem, which goes through much of what the Government announced in their Budget, is an emphasis on dressing up measures of class spite as though they provide a springboard for surmounting real-world and acknowledged problems in financing public services. Even if we believe the Government's figures for savings as set out in the Red Book—a figure rising to £140 million a year from the current estimate and £120 million in the first full year—the Committee would do well to remember that that would finance the operation of the national health service for precisely 24 hours. Even if they got the lot back, the Government are not buying themselves very much time.

The third characteristic of the Government's approach to the Budget is, of course, the iron law, as we must now call it, of the Financial Secretary—in effect, "If you damage someone, you are acting with their best interests at heart." I invite the Financial Secretary—just as she argued on pensions, and just as one of my hon. Friends did on mortgage interest relief—to talk to my mother, or any other policyholder with medical insurance policies, and explain how this measure will help them.

My fourth and final point about the Government's general approach is that the present Prime Minister and Ministers on the Treasury Bench gave solemn assurances during the election campaign about their wish not to increase taxation. This measure is clearly a withdrawal of a tax expenditure, or, to put it in English, an increase in taxation. That is not good enough.

On openness and transparency, a matter that we discussed last night, I heard a suggestion from the hon. Member for Dudley, North (Mr. Cranston), who is present. Perhaps I did not do him justice in the short time allowed for the winding-up speeches. Perhaps he would have liked to say something, if only space had permitted, in his election address.

I have in my constituency a company called Freight Media, in which I have no interest but which I respect. It operates for all political parties and puts out the wagons with sandwich boards on the side that tell people who they should vote for. Indeed, the company was also in evidence at the grand prix at Silverstone this week.

I wonder whether the Government were really prepared to level with their electors and supporters, given that they are proud of the way in which they have secured, for the first time, representation on the south coast. Would it not have been more appropriate for the Labour party to tour the south coast during the election campaign, when people could still have changed their minds, with large boards affixed to the sides of lorries saying, "We do not propose to increase taxes but"—for reasons that may or may not be explained this afternoon—"we think it right that you, the elderly, should have your health insurance tax relief removed."

By way of context, it is important to flag up that the relief, which was introduced in 1990, was reduced to the basic rate by the Chancellor in 1994. Because it is credited at source, lower rate taxpayers and people who pay no tax can also join in and get the full benefit of it.

There is little evidence that the relief goes largely to the affluent. What is quite clear is that the elderly—those who have retired—are not by any means the richest, let alone the most directly influential, section of society, although some are relatively well off. The Government's proposal targets the weak in a way that I, as a Conservative, find unacceptable.

I want to analyse the Government's proposals, and I shall begin by inviting them to consider one or two points. I should make it clear to the Financial Secretary that they are not in any sense political points; they are Committee points. I hope that the Financial Secretary will do me the courtesy of listening. Although I sometimes challenge her to give an immediate response, and although I would prefer her to try to reply to my points today because of the uncertainties that may well affect some of those involved—including the providers of health insurance—I ask her to reflect on what I shall say about the detailed operation of clause 17, and perhaps introduce further measures on Report.

I concede that the Government have, to an extent, recognised that, even when a Chancellor of the Exchequer gets up to make an announcement, both providers and policyholders are caught when the music stops and there may be inequities if some smoothing relief is not given. As the notes on clauses helpfully explain, an attempt has been made to provide for the renewal of existing contracts—subject to some safeguards—as well as for new contracts that were in the pipeline.

According to my analysis, there are three outstanding points. Some of my hon. Friends who raised those points with me may well want to return to them in more detail. I am not sure whether the first is dealt with in the Bill as currently drafted, but I regard it as important. I refer to cases in which the insurance provider has passed the contract offer for the year just ahead of 2 July, which is the operative cut-off date, to ensure that contracts that are ready to go out are available for the whole year. I am told by some of the providers that there has been no phoney business and no bunching up of contracts. I feel that, when people have made normal commercial arrangements not designed to frustrate anticipated legislation, those arrangements should stand.

My second point relates to oral contracts. Both a provider and the Association of British Insurers have told me that many contracts are now arranged through telephone sales. People give credit card numbers over the telephone, and nothing is written down initially. As I read the Bill, it is pretty clear that the contract exceptions are confined to contracts in writing.

No one wants to promote gross abuse of the system, but there ought to be some way of providing for genuinely understood contracts. I am no lawyer, but I take an interest in such matters. If there is no way of providing for that type of contract, will not a real difficulty be created between policyholder and insurer in that a contract that has been undertaken orally on one basis will then be materially frustrated by a change in tax law? Such a change would create an inequity if the insurer held the policyholder to the contract.

The third point is narrower, but I think that it is important to some providers. I am familiar with it from my own experience with paying monthly for an annual contract. I understand that, for reasons that appear to relate to consumer credit law, a number of such contracts are written on the basis of a renewable monthly contract. If that is so, as I read the Bill, come 2 July it would be possible to make one such renewal, which would run until 2 August, but it would not be possible to have a full year's renewal by a series of monthly contracts. I suggest to the Financial Secretary that, if that has been the traditional and reasonable way of constructing these matters, she should consider some relief.

We are faced with a guillotine in Committee and, as a result of the Chancellor's decision, with a guillotine on these tax reliefs. It is incumbent on the Government to think hard about the transitional effects and to soften them where appropriate. I genuinely do not want to press the Financial Secretary on this matter, except to ask her to consider these essentially Committee points and see whether she can come up with some alleviation.
I shall now deal with the general issues that are more germane to the amendment. There is a continuing incoherence in the Government's figures, which is why we want a structured and comprehensive report on what is going on. It is remarkable that the Budget Red Book of 2 July refers to the potential catch in the withdrawal of this relief. It refers to a third of a million people—which is an unusual fraction for the Red Book—whereas the Financial Secretary, in a written answer 24 hours earlier on 1 July at column 108 of Hansard, referred to a written answer given by the previous Government in the shape of my right hon. Friend the Member for Fylde (Mr. Jack) on 13 March at column 322, which referred to 600,000 people. That figure seems to be in line with independent studies, although the precise number is not certain.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

If the hon. Gentleman studies the parliamentary answer to which he referred, he will see that the figure was an estimate, not an exact figure.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

If so, we were given an estimate of 600,000 on 1 July, and another estimate of a third of a million in the Red Book on 2 July. That is a divergence of almost 100 per cent.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

I refer the hon. Gentleman to the Adjournment debate that was secured by the hon. Member for Eastbourne (Mr. Waterson). The figures were given in that debate and were confirmed in a written answer to his hon. Friend.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

I am grateful for that information. We shall reflect on what the Financial Secretary said and we shall come back to her if appropriate. Throughout this process we have had some difficulty getting answers to written questions.

The hon. Lady just said that the figure given was an estimate. That is precisely the point. We are still uncertain about the impact of this measure, which is why we are calling for a full analysis.

My second point concerns the likely impact on national health service waiting lists. On 14 July, which was after the Budget, the Minister of State, Department of Health, the hon. Member for Darlington (Mr. Milburn) was asked by my hon. Friend the Member for Romsey (Mr. Colvin) to estimate the impact on waiting lists. The Minister replied: Any such estimate would be pure speculation. Most of the people who benefited from the tax relief were existing policy holders. It would be wrong to assume that they will turn to the National Health Service in large numbers for treatment because the relief which had not been available when they first opted for private health insurance was now being withdrawn."—[Official Report, 14 July 1997; Vol. 298, c. 78–9.] I understand that line of argument, which is fairly familiar from the Treasury, but it is rather alarmingly plain that it is suggested that nobody knows anything about the subject. We know quite a bit about it, and what we know gives rise to concern about the Government's estimate of the saving. The matter should be more thoroughly reviewed.

Perhaps it should no longer surprise me that the Government not only cannot get their figures overtly consistent but do not appear to be able to read reports that have been commissioned from reputable outside bodies, notably the Economists Advisory Group. A detailed report, which is in my hands, was sent by that group to the Secretary of State for Health and to the Chancellor and the Financial Secretary in mid May. It must have been in their hands when they were preparing their Budget proposals.

It seems from the answer that I quoted a moment ago that the Government may be claiming that ignorance is a defence. They may claim not to have read the EAG report, which makes challenging reading. It analyses price elasticity for private medical insurance and the flows that are reported in the series, with which some hon. Members will be familiar, on private medical insurance by Laing and Buisson. It suggests some systematic flaws in those recent studies. For example, it suggests that they do not separate out the price impacts from total revenue, and the effect is that they grossly under-estimate the results of price increases on demand and the cost of medical services.

According to the Economists Advisory Group analysis, which I remind the House is in the hands of the Financial Secretary, what seems to have happened is that people have been trading down in response to the higher premiums that are required as they move into the next quinquennium of their health insurance and because health insurance is getting more expensive anyway because of higher costs and greater demands on the service. As people have been trading down, health insurance tax relief has enabled them to maintain their membership of a scheme. I did that myself, although I did not benefit from health insurance.

The danger is that people will no longer trade down, but will trade out altogether and go back to the national health service. Our amendment does not state absolutely that that will happen, but that everyone should pause while the matter is properly analysed.

Some of the proposals are a little high flown and complex, even for lay economists like me. It is necessary to put the matter in English in terms of its impact on the individual. I was impressed by the Economists Advisory Group's quotation of the comments of one elderly policyholder: We pay £133 a month but if the tax relief were abolished the cost would go up to £173 a month, which is really prohibitive. It seems a tragedy that we have been members of BUPA for such a long time then just when we need the cover the most we would find it expensive. We are dealing with a known hit on a significant number of electors and constituents set against a speculative benefit to the national health service.

I draw the House's attention to one specific point that is incontestable in terms of the Red Book figures. There is a suggestion of a small saving from the withdrawal of this relief because it is being taken away midway through the tax year in year one, 1997–98. However, we know from the Budget statement that no additional funds have been made available to the national health service in the current year. All that the Chancellor did was pre-empt some of the reserve that was available for 1998–99 and commit it five months ahead of the normal time to the health service, so if even one person with private medical insurance has to chuck it in and go back to the NHS, he will go on a waiting list and there will be no extra money to fund provision for him.

If the Financial Secretary studies the analysis, she will see that there is strong resistance among insurance policyholders to increases, which tend to take place every five years as they move into a new medical insurance bracket and annually as costs rise in both the private and public sectors of the health service.

It is difficult to calculate exactly how many people will leave. I have mentioned that it appears—I do not think that the Financial Secretary dissented, but I will need to study the record carefully—that the probable net number of policyholders who will be affected by the changes is about 600,000. I am not claiming that all those people will go back. What I can say is that the EAG study worked out that, for acute major procedures only, about 30,000 policyholders per annum could go back, increasing NHS waiting lists by that number.

Two other points also cast grave doubts on the Government's arithmetic in working out the benefit to the Treasury of the changes. First, there will be a loss of insurance premium tax from any withdrawal of policyholders. The insurers estimate that that loss will amount to about £7 million a year. Secondly, the health service benefits from the use of private beds in NHS hospitals and that benefit is estimated to be about £20 million a year.

In the amendment, I have been seeking not to give a final, definitive answer to the question how many of the 600,000 people will up sticks and go back into the NHS, but to suggest that there is a sufficient problem here for the House not easily to accept the changes without a proper, published study and discussion. We could, for example, ask the Health Committee for a short report.

Many of these people will not only suffer, but indirectly impose a further load on the NHS. Frankly, we should be told more. The net effects of the changes should be properly analysed and their damaging effect on individuals avoided until these matters have been cleared up and thoroughly resolved.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

Nice try. That is a standard ploy of oppositions: when in doubt, ask for a report. We used it on one or two occasions. The Opposition are unable to find a genuine amendment to the clause and apparently unable to bring to bear the great intellectual depth that the hon. Member for Daventry (Mr. Boswell) suggests, so he makes this proposal.

The Committee's deliberations will be assisted if I present the facts that support the Government's decision to withdraw tax relief on private medical insurance for the over-60s. In explaining the Opposition case before Opposition Members retire to the bar, rather than when they return and are in a disruptive and public school boy frame of mind, I hope—

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

On a point of order, Mr. Lord. Last night, I heard some remarks by the Financial Secretary that were in that vein and I have today again heard it asserted that Opposition Members are in some sense not treating these matters with the seriousness that they deserve and that their inability to do so is related to the consumption of alcohol. The matter has been drawn to the attention of the Chair on past occasions. I do not have a copy of "Erskine May" in front of me, but in the absence of any definite information should not the Financial Secretary be invited not to proceed further with her line of argument and, indeed, to withdraw the remarks that she has just made?

The Second Deputy Chairman:

The obvious answer is for everyone in the Chamber to concentrate on the matters in hand.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury 4:45 pm, 16th July 1997

When private medical insurance relief for the over-60s was introduced by the Conservative Government in 1990, they claimed that it would encourage the growth of insurance cover for that group in society. They did not undertake any research to find out whether it would work, and it did not. The subsidy did not secure a significant growth in provision.

When the relief was introduced, some 350,000 contracts existed, covering 500,000 individuals. Those people had already purchased medical insurance, so the tax relief was a subsidy to them. No doubt they were very grateful to receive it, but it played no part in their decision to take out insurance. The question that the hon. Member for Daventry (Mr. Boswell) must answer is, should people be subsidised for action that they would have taken anyway?

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

I will give way to the hon. Gentleman in a moment.

Since 1990 and up to 1997, the number of contracts has increased only marginally, by 10 per cent.—yet the cost to the taxpayer for that 10 per cent. increase is £140 million. Perhaps the hon. Member for East Worthing and Shoreham (Mr. Loughton) will explain why taxpayers' money should be used to benefit a very few people who had already decided what they would do.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

Later, I hope to elaborate on my comments and take up the question why, yet again, it is a Government onslaught on minorities.

I want to pick up the hon. Lady on her remarks and, with reference to the major health care providers, ask on what evidence she is basing her claim that people who took out health care insurance before 1990 have not changed during the years to 1997. What about those who have died? What about those who have been priced out of the market because the average price of pensioner health care insurance has gone up by at least 11 per cent. a year? Is the hon. Lady really saying that there has been no change in policyholders over those years?

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

Conservative Members need to make up their minds on their line of argument against the Government. The hon. Member for Daventry said that people were long-standing contributors to the schemes and that they should not be deprived of them. Now, the hon. Member for East Worthing and Shoreham is taking a different line, saying that that is not the case.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

The substance of my argument was that some members were long-standing contributors, and that they had some wish, in equity, to get some benefit from their long-standing withdrawal from imposing, at least partially, any cost on the NHS. Equally, some were marginal cases and might otherwise have stayed with the NHS rather than subscribe to private medical insurance.

The matter is not entirely clear, but it could be clarified by the sort of report for which we have asked. If the hon. Lady does not wish to produce one, I suggest that she speaks to those who produced the EAG report, and explains what is wrong with the calculations in it.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

I shall demonstrate that insurance companies—by using information that they themselves have provided; and they provide the insurance cover—expect that there will be almost no impact on the number of people who have insurance policies. Already those companies are offering solutions.

Provision of the subsidy is truly a measure that benefits only the few—5 per cent. at most—at the expense of the majority. Why should taxpayers pay for relief that offers no clear benefits? The Government have therefore decided to use the money saved from abolition of the relief to help pay to cut VAT on fuel to 5 per cent., thereby particularly benefiting low-income households and pensioners.

It is truly breathtaking for the Conservative party, after 18 years of undermining the national health service, to try to portray itself as the pensioner's friend, worrying about the NHS while painting a bleak picture of it.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

The parliamentary newsletter of the Association of British Insurers states: Although presented as helping to pay for the cost of reducing VAT on heating, the Association's submission to the Chancellor indicated that it will cost the Government more in terms of extra NHS costs and loss of insurance premium tax than it will save on the relief itself. Will the Minister comment on that?

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

I am so glad that the hon. Gentleman has managed to have an original thought, although it has been supplied by someone outside the Chamber. I will, however, deal with precisely that point.

There is no indication that those who have private medical insurance and receive relief will change their minds because of our decision. In the name of fairness, however, the Government have made specific provisions in the clause to ensure that relief is not ended immediately, but honoured to the end of the annual contract. Such provision will give individuals who are concerned about their private medical insurance time to seek advice from their insurers and examine the options available.

I will deal with the options that insurance providers say are available after I allow the hon. Member for Grantham and Stamford (Mr. Davies) to intervene. Perhaps he can tell us whether it is right that people should be subsidised to do something that they would have done anyway.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

The Minister just said that there is no indication that relief withdrawal will reduce the number of people who qualify on age grounds taking out private health insurance. That proposition is extraordinary, and essentially amounts to saying that one can increase the price of something—the net price to individuals taking such insurance cover will increase substantially after abolition of tax relief—without reducing demand for it. Surely that proposition is fundamentally implausible, and cannot possibly be true in the health care or any other sector.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

What do the insurance companies say about the point raised by the hon. Gentleman? In The Times of 3 July 1997, in an advertisement headed "If you think private healthcare will be too expensive without tax relief, consult a specialist", Norwich Union—one of the largest providers of such insurance packages—stated: If you're over 60, you've probably benefited from tax relief on your healthcare premiums. That changed after yesterday's Budget and you'll soon start paying up to 30 per cent. more. But to find out how you won't have to, no matter who your policy's with, call the Norwich Union Healthcare Tax Relief Helpline now. Norwich Union will ensure that people can continue their policies without extra cost. A report in The Independent states that Norwich Union, one of the largest providers of this type of insurance, is confident that 98 per cent. of customers need not pay any more and could keep their private medical insurance. Those are the facts.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

I am sure that the hon. Gentlemen, to whom I am not giving way, will be able to catch your eye, Mr. Lord, and make their own contributions.

These are the facts. The Government have outlined their case for abolition on the basis that the relief is not justified. It has not worked. There has been no substantial increase in the number of people with private medical insurance. The amendment is defective. There is no reason why the many taxpayers should continue to provide this massive subsidy for the few. I hope that the Committee will reject the amendment, and support the Government.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury) (EMU and the City)

I support amendment No. 13. It echoes amendment No. 14, tabled by my hon. Friends the Members for Gordon (Mr. Bruce) and for Kingston and Surbiton (Mr. Davey) and me, but in a rather different spirit.

It was clear from our interventions on Second Reading that we share the Government's philosophy in many respects. We believe that it is inequitable that a relatively well-off section of the community should be subsidised through tax relief. This tax relief was originally introduced by the previous Government for the wrong motive—to weaken the NHS. We therefore support the Government's broad policy position, which is why we supported the Government on Second Reading.

However, this is the Committee stage. It is an opportunity to review the proposals in more detail, and, echoing some of the points that have already been made, we seek a much more thorough analysis of the financial implications. There are people employed in the Treasury—econometricians labouring in the bowels of the Ministry—who could be asked to produce some useful figures with which we can work.

At the moment, there is a wide spread of estimates about what will happen. Within the insurance industry, for example, Western Provident commissioned a survey by Gallup, which showed that an increase of 50 per cent. in premiums would lose it about 70 per cent. of its subscribers. That is a very high price elasticity of demand. Indeed, it seems implausibly high.

At the other extreme, the Government are telling us that their proposals will have no impact. Somewhere between those two extremes almost certainly lies the truth. In his intervention, the hon. Member for Grantham and Stamford (Mr. Davies) captured very clearly where that truth might be.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

One always tries to avoid technical terms in this place, but the hon. Gentleman mentioned price elasticity of demand. Underlying the Minister's presentation of the Government's case is the clear assumption that price elasticity of demand for health care insurance is precisely zero. Does the hon. Gentleman agree that that is fundamentally implausible? Can he think of any commodity on God's earth for which the price elasticity of demand is literally zero, because it is only in that context that the hon. Lady's remarks make any sense?

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury) (EMU and the City)

The hon. Gentleman is right; I can think of no such commodity. The logic of the Budget suggests that the Government believe that behaviour can be changed through taxes and tax incentives. The purpose of increasing petrol taxes was to discourage motoring; the purpose of increasing excise duties on cigarettes was to discourage smoking; and the purpose of reducing MIRAS was to dampen the demand for housing. We know from experience that any impact is likely to be relatively small, but not zero. That is the point of my contribution.

In the absence of any sensible estimates, we have to work with the rough arithmetic we have been given. My understanding is that the cost to the Treasury of this tax relief is about £120 million to £140 million. I also believe that the total annual pay-out for medical insurance is about £400 million, so it would require only a quarter of the insurers to drop out of the scheme to eliminate completely the gain to the Treasury from the abolition of relief.

We have to put that in the context of the overall health service budget. The Liberal Democrats have been labouring to bring to the Government's attention the marginal position of the health service budget. On the basis of estimates produced by the Library, we believe that increased inflation will cut the health service budget in real terms by £400 million this year. After the additional injection of cash, the budget may be increased by about £420 million next year.

That means virtually no increase in health service provision over two years. Any loss from this relatively small measure will mean a reduction in per capita spending in the health service. That is why we support the amendment, and are pressing the Government for a more thorough analysis of the economic impact of their proposal.

5 pm

Photo of Professor Ross Cranston Professor Ross Cranston Labour, Dudley North

I start with a digression. The hon. Member for Daventry (Mr. Boswell) referred to my contribution yesterday. When winding up last night, he quoted Shakespeare. I should have thought that a close study of Shakespeare would have given him an appreciation of the use of irony, but apparently not.

The hon. Gentleman also does not seem to appreciate the impact of the defeat that his party suffered on 1 May. He has not realised that our victory was so massive because we appealed to the many rather than the few. The tax relief that we are talking about benefits very few—little more than 500,000 individuals. Only the relatively affluent can take out private medical insurance. The hon. Gentleman quoted a premium of £133 a month. Most people over 60 in my constituency cannot afford £133 a month.

A great deal has been made of the possible impact of the measure on the national health service. The Conservative amendment would defer the removal of the relief until the impact on the NHS has been assessed. There can be some speculation about the possible impact of the measure. There seems to be a price inelasticity. Many of those who are already taking out private medical insurance will continue to do so. I think that the hon. Member for Grantham and Stamford (Mr. Davies) finally grasped that a moment ago.

The insurers have made various assessments of the impact on the NHS. PPP suggested that the measure would increase NHS waiting lists by more than 100,000. Western Provident said that the added cost to the NHS would be as high as £300 million. BUPA has given a different estimate. If the insurers are unclear about the impact, I suggest that we should not postpone the measure for an assessment that will not be clear for a number of years.

I was taken by the remarks of Mr. William Laing, a leading analyst in the area. He was quoted in the Financial Times as saying: the amount of a typical PMI premium is far higher than the cost to the NHS of the treatment covered. He went on: Taken together, this means the tax relief was ridiculous and could not possibly be justified in terms of savings to the NHS".

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Does the hon. Gentleman agree that the most important testament is that of the voters? [Laughter.] May I therefore ask him whether he shared his enthusiasm for doing away with the tax relief with his voters in his election address, or whether he kept it from them, much as he did with his enthusiasm for doing away with mortgage tax relief?

Photo of Professor Ross Cranston Professor Ross Cranston Labour, Dudley North

The hon. Gentleman does not seem to listen, quite apart from his inability to appreciate irony.

The hon. Member for Daventry made certain remarks about the aging population and the increasing demand on the health service that it would impose in coming years. There is certainly an element of truth in that.

The important reason why the Government have taken this measure is that it frees up money for other steps which will have an immediate impact on helping the elderly—especially, as my hon. Friend the Financial Secretary to the Treasury said, the reduction of VAT on fuel. On Second Reading, I gave some figures of the extent of fuel poverty. It is a serious problem, which causes very serious health problems among the elderly, and the Government have taken an immediate step on it.

In addition, as my hon. Friend the Financial Secretary to the Treasury said, this tax relief measure has been ineffective. It began in 1990. At that time, about 500,000 individuals took out private medical insurance. One estimate I have seen is that, in 1995, only 550,000 people took out private medical insurance; so there is little evidence that that relief has led to any significant increase in the purchase of private medical insurance.

Indeed, Mr. William Waldegrave, who is no longer in the House, following the voters" decision on 1 May—to take up a point raised earlier—argued at one point for the abolition of medical insurance premiums relief. He said that it had not increased take-up of private medical policies, and was expensive to administer. Conservative Members would benefit from sometimes taking into account what some of their former colleagues have said.

The expense of the measure has been referred to. According to the Red Book, it has cost about £560 million since its introduction in 1990. That is very significant. One reason why the cost has gone up is that insurance premiums for the elderly have gone up at three times the rate of those for everyone else. The removal of such an expensive measure will free up funds which, as I said, will more immediately benefit the elderly.

I oppose the amendment, and support the budgetary measure.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

I welcome the comments by my hon. Friend the Member for Daventry (Mr. Boswell), because some of the points he raised—I hope the Financial Secretary will take them on board—will have a direct impact on Prime Health, a major health insurance firm based in Guildford, and on many elderly people in my constituency.

I estimate that more than 5,000 elderly people in the Guildford constituency currently enjoy the benefit of the tax relief. In the light of what the Financial Secretary said this afternoon, I am concerned that if—or rather when, for I fear it will happen—some of those 5,000 people cancel their health insurance policies, because the removal of the relief has increased the costs so much, they will at some point make a claim on our local health service. When that happens, the many will suffer as a result, not just the few. Everyone who wants to use the health service at the Royal Surrey hospital in Guildford will suffer.

It should be understood that one of the reasons for delaying the implementation of the clause is that private health insurance benefits the whole community, not just those who take it out. It benefits the whole community, because it relieves the national health service of costs that it would otherwise have to meet.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

What is your evidence for suggesting that all private medical insurance holders would be forced to use the national health service? I have had only one person in my constituency complain about the measure, on general grounds. What is your evidence to the contrary?

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

I assure the hon. Lady that I have considerable evidence to the contrary. I have received almost as many letters on this subject as on any other that has arisen in the past few months.

Many of those who have written to me have said that they fear that they will have to stop receiving the benefit of private health insurance. They will have to rely on the local health service, and, as a result, they will impose a burden on it that all will have to share, if the speculative savings from abolishing the tax relief are to be diverted into changing the rate of VAT on fuel. It is obvious that those parts of the country with the most people having health insurance will have the most cancellations. The damaging results of the measure will hit all the people in such areas, including my constituency.

The Secretary of State for Health said earlier today—I wrote down his words as he said them—that, if there is a harsh winter this year, he will take responsibility. I will remind him of those words this winter when people who have had private health insurance in my constituency can no longer afford it.

My hon. Friend the Member for Daventry raised three specific consequences of the measure, which his amendment would mitigate while the Government worked out the damaging results of rushing the measure through the House. Representatives of Prime Health in my constituency spoke to me at some length about the three points on Friday.

The provision on verbal contracts will affect the firm specifically. People live busy lives and like to conduct business on the telephone—I do not mean hard-pressure telephone selling, but straightforward, modern business conducted on the telephone. Prime Health has entered contracts with its customers, and it is concerned that those contracts that predate the 2 July cut-off date will not be covered by the transitional provisions in clause 17. I would welcome an assurance from the Financial Secretary that verbal contracts will be covered in the transitional arrangements.

5.15 pm

It is normal for annual policies to be renewed about a month ahead of the renewal date. By the cut-off point of 2 July, a month's worth of renewals had been contracted for between health insurers and their customers. By changing the rules and imposing a guillotine on the tax benefit, the Government will change those contracts after the event.

I ask the Minister to consider applying the old rules to such contracts, just as we apply the old rules and rates to property contracts that have been exchanged but not completed. That would be consistent with the conduct of the previous Government, and it should be the approach of this Government. If contracts have been exchanged, but the start date has not yet been reached, the provisional arrangements should allow for that situation. The wording of clause 17 is not clear, and I should be grateful if the Minister could clarify the point.

As my hon. Friend the Member for Daventry pointed out, more than half the business of some private health insurers will be affected if monthly contracts are not taken into account. Monthly contracts are a form of payment for health insurance over a year, and they have been specially approved by the Inland Revenue. Had the Government taken more time over the introduction of the measure, they could have spoken to the Inland Revenue and found out more about the situation before they made speculative and highly optimistic assumptions about the effects of the clause.

It is essential, in the interests of the Government's objectives, that monthly contracts fall within the transitional arrangements. If all the monthly contracts are denied relief from the end of this month, all the customers with such contracts will require consultations at once, instead of over the year as their contracts come up for renewal and the ending of the tax relief hits them. It is unrealistic to expect even Norwich Union, let alone any of the other insurers, to cope with half their customers at once calling to ask about less expensive insurance.

We can predict the consequences. Many of those people, because they will not receive adequate counselling, will take the only decision they can afford, and cancel their insurance contracts. As a result, the savings on which the Government's arguments are based will disappear in additional costs to the national health service.

The Financial Secretary has already pointed out that the measure will make a 25 per cent. saving. Only one in four of those currently enjoying the benefit of private health insurance will have to cancel for the Financial Secretary's entire calculations to be thrown out of the window.

We know that health insurance costs for the elderly have gone up by much more than inflation.

Photo of Derek Twigg Derek Twigg Labour, Halton

Does the hon. Gentleman recall a report in the Financial Times on 24 April 1997 that the chief executive of Western Provident Association, Julius Stainton, had told a recent conference that insurers had only themselves to blame for the Labour party's plans for abolition, as many had used the introduction of the tax relief as a cover for a sharp increase in premiums for the elderly.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

The hon. Gentleman makes an interesting point. There is always a risk that a tax relief will be misused in some way. If that is the case, the Government should phase out the relief step by step over a number of years, and see what consequences that might have for the numbers involved.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

Let me answer the question.

I understand from the industry that the real reason why costs have gone up is that, as private health insurance has become more popular, the industry has no longer been able to subsidise the cost of elderly patients by charging more than can be justified in commercial terms to younger patients.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

Does my hon. Friend agree that the costs in the national health service for provision for elderly patients have also risen sharply? To my recollection, when the age of 75 is reached, the annual cost to the public purse is about £1,300. It is not surprising that private medical insurance costs should have risen commensurately.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

My hon. Friend makes a good point. Over the past seven years, many of those costs have risen. In a commercial world, the increase in the cost of health insurance for the elderly primarily reflects market forces, not any effect of the tax relief. Despite the increased cost, the number of elderly taking advantage of health insurance has risen. Without the relief, the number would have fallen, and the costs to the health service would have been very much higher.

Photo of Derek Twigg Derek Twigg Labour, Halton

You cannot have it both ways. You said that, in that case, the Government should phase out the tax relief. Now you say that you agree that it should be phased out.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

It would be extremely unwise to phase out the tax relief at all, but you would be much wiser to phase it out over a number of years than to cancel it halfway through this year. That is the point that I was making.

My general point is that the rush with which the change is being introduced shows a greed on the part of the Treasury for which all patients—those who are well off and those who are not—will suffer. More people will make demands on the health service, and that demand has not been budgeted for this year or beyond. We will all suffer as a result. The proposal is damaging to the many, not just the few.

Photo of Liz Blackman Liz Blackman Labour, Erewash

I begin by saying to Conservative Members that I am staggered that you have come to the House to talk about a relief that you implemented in 1990—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Several hon. Members keep using the word "you". Will they please try to remember not to do that when they make their speeches? I know that it is difficult to do, and that everyone is new to it, but it helps enormously if I do not have to keep getting to my feet to interrupt hon. Members.

Photo of Liz Blackman Liz Blackman Labour, Erewash

I apologise, Mr. Lord. I am staggered that Conservative Members who implemented the relief in 1990 and have had seven years to operate it should come with so little evidence and ask Labour Members to evaluate their measure. I want Conservative Members to reflect on that. Was no evaluation undertaken during that time? It seems incredible that the effect of the relief has not been analysed.

One of the factors that distinguish the Labour Government from the previous Government is their attitude to taxation—the way that we raise revenue to fund policy and to service debt. In that respect, we inherited a considerable legacy.

Taxation strategies are not neutral. Behind them are values and priorities of a particular political complexion. What is taxed, and how, reveals a Government's priorities. Whacking tax or VAT on fuel reflects a different set of values from those that underlie the proposal to remove the tax relief on medical insurance premiums.

It is essential that the principles are clearly spelled out, to give people a yardstick by which to judge us. Labour has made no bones about the principles that should underpin the taxation system that we impose. We aim to promote work, to encourage savings, to encourage investment and to demonstrate an element of fairness. Those are the principles by which we will be judged.

By fairness, we mean a broad-based system, under which no sector of the population is unfairly burdened or has an unfair advantage, and where taxation serves the majority, not the minority, and specifically avoids punishing the less well-off. The tax relief that we are discussing fails all those tests. It does not serve the majority. It gives an unfair advantage to the few. It falls unduly on the less well-off as taxpayers.

The Government are committed to the NHS, to which all taxpayers contribute and which is open to all. We showed that commitment in the Budget. The private health sector is part of the market economy. That is accepted by the Government. The market economy, in the private health sector, offers choice to a small number of people. What is desperately unfair is the expectation that the majority of taxpayers should fund that personal choice. It is a subsidy. I hope that I can use the word "you" in this context. The adage, "You pays your money and you takes your choice" is applicable.

It is interesting to note that the assisted places scheme is a similarly unfair tax. The same logic has applied to the abolition of that scheme.

The substantial funds would be far better used to reduce the VAT on fuel, as has been mentioned. That would have significant benefits for many people in this society, especially those on limited incomes. That is just.

By their own standards, the previous Government did not achieve what they had intended from the measure, which was to increase the uptake of private medical insurance. The Conservatives have no statistics of their own to demonstrate its impact. They failed by their own criteria, but, above all, they failed the test of fairness, which, under a Labour Government, is a significant test. That is why the relief will be abolished.

Photo of Nick Gibb Nick Gibb Conservative, Bognor Regis and Littlehampton

This clause, and clause 19, which we shall debate later, make the Budget one that hurts pensioners. Pensioners suffer from an 11 per cent. devaluation of their pension funds from the ACT changes, and they suffer from the vindictive and envy-motivated decision to abolish tax relief on medical insurance for the over-60s.

The relief was introduced by the then Chancellor, Nigel Lawson, in his 1989 Budget as a way of encouraging people to take out or to keep on their private medical insurance in retirement. That, in turn, would help to relieve some of the burden on the NHS.

It is an entirely sensible policy to encourage people who can afford it, or who could afford it with a small tax incentive, to make their own provision for health care. It is especially sensible if it can be demonstrated, as I shall seek to do, that the cost of the tax relief is less than the savings that the NHS makes when the patients are treated at their own expense.

The Labour party seems to think that, if the articulate middle-class pensioners are "creamed off" by the private sector and are therefore no longer dependent on the NHS, the NHS itself will suffer because fewer people using it will be demanding a good service. The argument is that, if 600,000 articulate people stop using the NHS, it will cease to provide first-class clinical services. That is utter nonsense. It is the same argument that the Labour party uses against private education, and the Labour party is simply wrong.

5.30 pm

The existence of a strong private sector in both health and education provides a gold standard against which the state sector can compare itself and towards which it can seek to improve. Of course, that assumes that the private sector will provide a better service, which the Labour party does not necessarily accept.

Here we see the root of Labour's plan to abolish tax relief on private medical insurance—the old Labour insecurity about the private sector, old Labour's drive towards homogeneity and lack of choice. Thanks to 18 years of a Conservative Government who believed in free enterprise and choice, 5.7 million people now have private medical insurance—about 10 per cent. of the population.

As Labour Members have said, only about 5 per cent. of people over 60 have medical insurance—a proportion significantly lower than that in the population in general. The tax relief was introduced to encourage take-up in that section of the population. Although the Labour party claims that the introduction of the tax relief has not increased take-up among the over-60s, the facts state otherwise.

In 1989, there were about 400,000 individuals over 60 with private medical insurance. Today, there are 600,000. There are our statistics. That amounts to a 50 per cent. increase while the tax relief was being given. It is an especially high increase given that, in the same period—between 1990 and 1997—the total number of individuals covered by medical insurance dropped by 7 per cent. in the early 1990s and rose over the following seven years to broadly the 1990 level.

In other words, there was no overall increase in the number of people covered by medical insurance between 1990 and 1997, yet there was a 50 per cent. increase in the number of people over 60 who were covered. The over-60s now account for one third of all individuals with medical insurance, compared with only one quarter when the relief was introduced.

We should not be hearing Ministers and other Labour Members claiming that the tax relief had no effect on the numbers taking out private medical insurance. The facts state otherwise, and those who say that there has been no effect are simply wrong.

I shall now say something about the cost of abolition. The Red Book shows that the gross savings from the abolition of the tax relief would be £115 million in 1998–99 and £135 million in 1999–2000. The relief equates to more than £500 million of gross premiums.

According to the Association of British Insurers, the overall claims ratio for that age group—the cost of claims expressed as a percentage of premiums—is about 80 per cent. That means that £500 million in gross premiums represents £400 million—worth of medical treatment. The insurance industry has estimated that abolition of relief, which will increase premiums by about £25 a month, will result in one third of the over-60s with insurance terminating their policies and becoming reliant on the NHS. That corresponds to £133 million—worth of extra medical care, which the NHS will have to find as a result of the abolition of the relief. That compares with a saving of only £115 million.

It is absurd for the Financial Secretary to the Treasury to dispute those figures on the basis of a marketing advertisement in The Times. I hope the Government are basing their statistical analysis on more than that. Their figures do not add up.

There is worse. As my hon. Friend the Member for Eastbourne (Mr. Waterson) pointed out in an Adjournment debate on 16 June, there will be a domino effect if 200,000 people cancel their policies. As the number of private medical insurance policyholders decreases, an additional burden will fall on those who remain. That means higher premiums for them. Thus, more people will be priced out of insurance and become reliant on the NHS.

When one considers that the types of medical treatment most likely to be required under the private insurance contracts are hip replacements, cataract removals and knee joint replacements—operations which are already stretching the NHS to breaking point—one realises how absurdly the Government are acting in abolishing the relief. People who need hip replacements and new knee joints suffer much discomfort and pain, and the Government's policy will mean longer waiting lists for those procedures in the NHS. That shows how mean-spirited is the Government's abolition of the relief.

I have received many letters from retired people in Bognor Regis and Littlehampton asking me to urge the Government not to abolish that much needed and sensible tax relief. On their behalf, I urge the Government to drop their proposal, and I urge right hon. and hon. Members on both sides of the Committee to vote for the amendment and against clause 17.

Photo of Jacqui Smith Jacqui Smith Labour, Redditch

I oppose the amendment because it is designed to put off the implementation of an important measure in our Budget. I cannot understand why Conservative Members are so keen to keep a measure which clearly has not worked, even in their own terms. It has fulfilled neither the Opposition's aims nor ours.

Let us talk about the Opposition's aims first. The hon. Member for Daventry (Mr. Boswell) has used similar arguments to those used yesterday, when the Opposition said that mortgage interest relief at source promoted home ownership. I disagreed with him at the time.

Today, the argument is that we should keep private medical insurance because it promotes the practice of older people taking out private insurance—

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

The hon. Lady said that she disagreed with the proposition that MIRAS promoted home ownership. Does she therefore feel that it should be abolished altogether?

Photo of Jacqui Smith Jacqui Smith Labour, Redditch

My argument yesterday was that the decision in the Budget on MIRAS was right, because MIRAS does not promote home ownership, and that the money saved by the Government's current proposal on MIRAS could be put to better uses.

The Conservatives" argument presumably is that the tax relief promotes the take-up of private medical insurance by older people. Incidentally, it seems strange to argue that the only way to save the NHS is by persuading as many people as possible not to use it. That says something about Conservative Members' attitude to our national health service, which Labour Members believe should be available to everyone who needs it.

Private medical insurance relief has not achieved what the Opposition want it to achieve. Despite the fact that it has cost £560 million since April 1990, there is little, if any, evidence of an increase in take-up of private medical insurance among the over-60s. In fact, I would argue that those receiving it would have taken out private medical insurance in any case. That seems to be the suggestion from the fact that when an extra incentive is given people in large numbers do not take out more insurance. There is no reason to believe that scrapping the relief will cause a flood of elderly people returning to the NHS. The amendment does not stand up.

The relief has failed even in Conservative terms—the previous Government recognised that when they reduced it at the higher level—and it certainly does not achieve what the Government want. It subsidises the few who can already afford private health insurance.

I am sure that all hon. Members were interested to hear about the mother of the hon. Member for Daventry; I am extremely pleased that she can afford private health care. My mother is not yet 60, so she would not have qualified for the relief in any case, but my dad is; he does not have private medical insurance, but, through his taxes, he subsidises that of the hon. Gentleman's mother. I have no animosity towards her, but I feel that it is slightly unfair that my dad should have to subsidise her private choice through taxation.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

As the hon. Lady has been kind enough to refer to my mother, does she recognise the inequity of the position whereby my mother's private health tax relief will be withdrawn to support my expenditure on heating oil in a somewhat larger house than hers?

Photo of Jacqui Smith Jacqui Smith Labour, Redditch

It may be my fault, but I do not quite follow the logic of that. My argument about inequity was that, at the moment, the taxpayer is subsidising private choices.

The relief shows the same defeatist attitude towards public service that my hon. Friend the Member for Erewash (Liz Blackman) pointed out in the case of the previous Government's attitude to the assisted places scheme. Have our public services really got to the state where, to keep them going, we need to bribe people with taxpayers' money not to use them? Conservative Members clearly think that we have to bribe people out of the state education system and the national health service.

If that is so, it is because of the effect of 18 years of Conservative government on our schools and hospitals. We should not accept that as a fait accompli: we should consider ways of improving those facilities so that we no longer have to ask taxpayers to fund people opting out of public services.

Unlike the hon. Members for Guildford (Mr. St. Aubyn) and for Bognor Regis and Littlehampton (Mr. Gibb), I do not have people queuing up at my surgery and begging me to maintain the tax relief. I met an elderly man last week who had already waited 18 months for a knee operation and did not have private health insurance.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Will the gentleman's condition be assisted by additions to the queue owing to people having to give up their private health insurance?

Photo of Jacqui Smith Jacqui Smith Labour, Redditch

There is no evidence that the relief has increased the number of people taking out private medical insurance, and I therefore believe that there is no reason to suppose that its removal will cause people to flood back into the NHS.

Photo of Nick Gibb Nick Gibb Conservative, Bognor Regis and Littlehampton

The hon. Lady cannot have been listening when I pointed out that, in 1990, there were 400,000 people over the age of 60 with private medical insurance and that, by 1996, the number had increased to 600,000. Those are the statistics that are needed. Why was not the hon. Lady listening?

Photo of Jacqui Smith Jacqui Smith Labour, Redditch 5:45 pm, 16th July 1997

If the relief was so effective, why did the previous Government lose faith in it and take it away at the higher rate?

Older people who come to see me say not that they want the tax relief to be maintained but that the health service should be able to deal with their needs as they arise. Most of those people are not in the fortunate position of so many people in the constituency of the hon. Member for Guildford and cannot afford private medical insurance, even with the relief that was previously offered, and they understand that in an emergency they will be protected not by private health care schemes but by a properly supported national health service.

It is depressing for Labour Members to see the crocodile tears shed by the hon. Members for Daventry and for Guildford on the subject of health care for the elderly. Yes, those older people have contributed throughout their lives: they have done so through taxation and national insurance, to ensure that they have a health service that looks after them properly in their old age. That is why I welcome my right hon. Friend the Chancellor's announcement of an extra £1.2 billion for health care.

The Budget clearly shows the different priorities of the Government and the Opposition. What does the amendment say about the Opposition's priorities, and what does the proposal to remove private medical insurance relief say about ours? It shows that we are honouring the pledge made in our manifesto—and in my election literature—that our taxation system would be fair.

Conservative Members suggested yesterday that, somehow or other, they lost the general election because the public had misunderstood our tax plans. I believe that it was because the Conservatives patronised people, as they did yesterday, and people felt betrayed and wanted a Government who were fair about taxation. People contrasted our promises on tax—to be fair, and to encourage work, saving and investment—with Conservative proposals and betrayals, and knew that we would spend their money wisely.

The Chancellor reiterated in the Budget what the money saved from scrapping the relief would be spent on. He said: The principle of fairness in taxation will guide all my Budget decisions."—[Official Report, 2 July 1997; Vol. 297, c. 312.] That is why the £120 million saved in 1997–98 and the £140 million saved in 1999–2000 on the failed relief for private medical insurance will contribute to cutting value added tax on fuel—another important pledge in our manifesto.

As I suggested, that shows the clear distinction between our taxation values and those of the Opposition. While they are happy to maintain an expensive and ineffective relief on private medical insurance, we want to use that money to cut value added tax on fuel—the most unfair and regressive tax introduced by the previous Government.

In case some Opposition Members are keen to jump up with the environmental justifications, which was, perhaps, what the hon. Member for Daventry was referring to earlier—although, there is a certain irony in Opposition Members claiming those green credentials and I am not sure which Opposition Member believes that he is Swampy—there are many other ways in which the taxation system should be used to achieve environmental aims. Value added tax on fuel was one tax which gave green taxation a bad name.

The choice represented by the amendment is clear—the deferral of the positive proposal to get rid of private medical insurance and use the money to cut the unfair and regressive VAT on domestic fuel or the maintenance of private medical insurance, which is ineffective and benefits only a few people. For that reason, I oppose the amendment.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

The Treasury team has shown a remarkable assurance about the estimate for the consequences of this measure. Indeed, the Financial Secretary to the Treasury said that she thought that the demand for private medical assurance was perfectly inelastic. That assurance is misplaced. At the beginning of the week, on Monday, the Association of British Insurers wrote to me saying: The Association remains concerned that the Bill seeks to implement policy decisions with very complex implications with no prior consultation and allowing for only a very limited period of consideration of the Bill by Parliament. This could lead to measures proving unsatisfactory and needing amendment in a subsequent Finance Act. My experience is that, far from being inelastic, the demand is—

Photo of Derek Twigg Derek Twigg Labour, Halton

On that point, an article in the Financial Times stated: PMI market analysts Laing and Buisson said that it believed these estimates were all incorrect. "To date the market for PMI has been price inelastic; increases in price have not been met by proportionate big drops in demand. Coupled with that, the amount of a typical PMI premium is far higher than the cost to the NHS of the treatment covered. Taken together, this means the tax relief was ridiculous and could not possibly be justified in terms of the savings to the NHS" said director Mr. William Laing". Mr. Laing makes a completely different point from that made by the hon. Gentleman on the elasticity of the market.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

I am not sure what the question was, but I will have a stab at answering it. It is very much the answer that I gave to another hon. Gentleman who has since departed from the Chamber. The best estimate of the elasticity of demand comes not from City scribblers, but from the voters. I represent a constituency with three hunts and yet, given my mailbag during the election campaign—

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

On a point of order, Mr. Martin. I understood that we were discussing amendments to the Finance Bill and not fox hunting. I would ask the hon. Member for New Forest, West (Mr. Swayne) to concentrate on the matter at hand.

Photo of Michael Martin Michael Martin Deputy Speaker (First Deputy Chairman of Ways and Means)

I am sure that the hon. Member for New Forest, West (Mr. Swayne) will get to the amendment in due course.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

I was trying to give some indication of the strength of feeling among my constituents. My mailbag on this measure has been greater than that I have received on hunting, which has been considerable. That is not surprising, since I represent those well-known retirement areas of Milford on Sea, Barton on Sea and New Milton.

That brings me to the nub of this mean-minded measure. What is extraordinary about it is the lack of consideration for elderly people and the retired. People who have retired are not as capable as those youthful Labour Members of adjusting their financial decisions relatively quickly. The elderly make long-term financial plans and commitments. The rug is being pulled from under the assumptions that they have made and the plans that they laid on retirement and beyond. It is a disgraceful and mean-minded measure. I support the amendment.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I cannot help but think of the many postbags that we have already discussed today. I must mention my postbag of one letter in support of the measures that the Opposition are discussing and the huge postbag and the many phone calls that I have received from elderly constituents, young constituents and people in poverty and difficulty—people who told me before the election, "If you don't do something about fuel costs, we'll never vote for you again." Is that not the nub of the matter?

Was it not absolutely right for my hon. Friend the Member for Erewash (Liz Blackman), in an outstanding speech, to point out the benefits of a taxation system being put together with social policy, which indicates the policies of the Government of the day? If ever a measure was more heralded than this Budget, I should like to know what it was. Opposition Members seem to suggest that my constituents had no knowledge of what was to be put before them. They know about it now, but I have still had only one letter in support of the measures that the Opposition are discussing.

Where are the measures? The hon. Member for Guildford (Mr. St. Aubyn) is not in his seat. He seemed to suggest that Opposition Members could have tabled amendments on phasing out the proposal on the relief on medical insurance for people over 60, but no such amendment has been tabled.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

Far be it from me to speak on behalf of my hon. Friend, but the timetable imposed under guillotine by the Government and the consideration of this Bill at such short notice after Second Reading, followed by a Committee stage on successive days, imposed severe strains both on practitioners who wanted to submit amendments for our consideration and on our being able to process and table amendments and have them considered. I have put the points to the Financial Secretary, and I am sure that she will do her best to answer them.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I am interested in that contribution, but the hon. Member for Guildford clearly had some measures in mind. Since our measures were well heralded long before the election—far earlier this year—they are no surprise to anyone. I should have expected the Opposition to be prepared if they felt the matter was so important.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

Yes, they were. I will indulge the hon. Gentleman. I spoke in person to more than 1,000 people in my constituency on that very matter and, in particular, on VAT on fuel. I do not think that any of my constituents will have found the measure a surprise. Indeed, it is typical of this Government and my party to consult widely when any measure is introduced, so I do not need to go further on that point.

Photo of Mr Peter Brooke Mr Peter Brooke Conservative, Cities of London and Westminster

I am grateful to the hon. Lady for her indulgence. How much consultation has taken place on advance corporation tax?

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I am interested that you want to broaden the debate.

The First Deputy Chairman:

Order. The right hon. Member for Cities of London and Westminster (Mr. Brooke) may want to broaden the debate, but I do not.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I concur completely with your wisdom, Mr. Martin.

I shall share a short story with the Committee. I visited two of my constituents in January on an entirely different matter. These people had worked hard throughout their lives and had made savings, but they were having some difficulties. They showed me into their best room because they wanted to show themselves at their very best, and certainly provide me with a cup of tea. I became blue with cold in that room because they could not afford to put on their heating.

6 pm

Some while ago, I remembered a Conservative Member who used to represent Derbyshire, South advising people such as the two constituents to whom I have referred that they would do well to wear hats and silk underwear to keep warm. That was said at about the time when value added tax on fuel was introduced. That piece of advice has not benefited my constituents, but they will benefit from the ability to pay the fuel bills that are now causing them so many problems.

Conservative Members ask why a review has not taken place. At the same time, they do not support the reviews that we are conducting. Conservative Governments did not conduct a review and we have decided to repeal tax relief for medical insurance. We are following the trend set by the previous Government in relinquishing the higher tax benefit, so there is nothing new in our approach.

We are a Government who follow common sense. Surely it is common sense to say that we shall do what we promised before the general election, at the same time taking into account factors that the Conservative Government seem not to have considered. The cold temperatures in which my constituents live contribute to their illhealth, and that illhealth is a cost to the nation through the national health service. Many medical reports set out the consequences of cold weather, leading to the illhealth of the elderly and the very young, whom I care about deeply.

As I said, I have received one letter in support of retaining private medical insurance tax relief. That constituent did not state that he would be part of a great haemorrhage from private medical insurance schemes—indeed, quite the opposite.

We are saying that we shall fulfil our election promises in a thoughtful way. We shall give people time to take proper decisions for themselves. They will be able to make choices for themselves. The greatest benefit will go to those people who do not have a choice, such as the two constituents to whom I have referred.

The Government are saying, as I have always said, that there must be fairness in taxation. We must have an equitable taxation system and an egalitarian society that ensures that those in most need will receive benefit. Those who have the least needs should not receive benefits that they do not require.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I cannot be alone in feeling that, whenever a Labour Member contributes to the debate, he or she succeeds only in tying the Government up in a knot. Earlier, the Financial Secretary accused me of some inconsistency. Perhaps she will consider the inconsistency that she introduced by claiming that there has not been a net increase in the numbers of pensioners taking advantage of tax relief on medical policies. If there has not been a large increase in those numbers over the past seven years, that suggests to me some contentment with the way in which the national health service has been run for most of the 18 years under a Conservative Administration.

Another inconsistency comes from those who suggest that the tax relief that the Government are seeking to claw back is worth more than the underlying treatment in the NHS for which patients will have to qualify. There is a further absurd inconsistency when it is suggested that there is no price elasticity. When it comes to mortgage interest relief at source, however, there is elasticity, because the Government have been using it as a way of cooling down the property market. These arguments do not add up.

I should disclose an interest as someone who has enjoyed a corporate BUPA subscription for some years, although I have never taken advantage of it. For many years, however, I have had to pay tax on it as a benefit in kind, and have been happy to do so. That has provided additional funds that can be used for patients using the NHS, as my family and I have done frequently.

It has become a cri de coeur or soundbite of the Government that they are a Government of the many, not of the few. It is a cliché that we hear time and time again. But this mean-minded measure is entirely consistent with the abolition of the assisted places scheme. There is no firm evidence that it will produce financial savings. No consideration was given to the future education of those children who are now enjoying assisted places. The Government will proceed, however, because it is politically correct so to do.

We shall have the same ordeal with country sports, but in the meantime the Government have decided to attack those pensioners who chose to spend their money as they thought fit on taking out their own private medical insurance, and in doing so took some pressure off the NHS, which we are constantly reminded is under pressure. That pressure is not denied, and in my constituency it is a key issue.

Let us remember that between 40 and 50 per cent. of expenditure in the NHS is directed to pensioners, who constitute just 16 per cent. of the population. That is happening because pensioners are a claims-intensive part of the community when it comes to spending in the NHS. They require longer stays in hospital, understandably. With further medical advances being made all the time, the situation will be compounded.

Many figures have been cited in the debate, and I shall add to them by saying that more than 400,000 private medical insurance contracts for pensioners have been taken out, involving more than 600,000 individuals. Many of the contracts are taken out for families.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

Does the hon. Gentleman accept that the Inland Revenue's figures show that there were 375,000 such contracts in 1996–97, 25,000 more than in 1990, covering a maximum of another 50,000 people?

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I shall not argue the toss between 375,000 and 400,000. I think that my point was well made. Different figures have been presented by different Labour Members. I shall use figures that come from BUPA, which is the largest provider of private medical health care insurance cover for pensioners. It takes account of about 48 per cent. of the market. BUPA estimates that the average cost to pensioners is just under £1,200 a year, which amounts to just under £300 a year in terms of tax relief. The figures are almost double for married couples.

These are not small sums. They apply to people who have saved for many years. We are talking of those—certainly this applies in my constituency—who have cheaper premiums as elderly people because they were members of medical insurance schemes before they were pensioners, and have remained so all the way through. Now, all of a sudden, without so much as a by your leave, it is all to go. They will be faced with deciding—it will be a hard decision—whether they will be able to afford to keep their insurance. That is what we are talking about.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

When some of my constituents suffer the degenerative illnesses to which we referred earlier and require a long stay in hospital, they often find that they are not covered by their private medical insurance. Have the hon. Gentleman's constituents had similar problems?

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

Indeed, the hon. Lady makes a fair point. That is why in some insurance policies there is great leeway in the cover that one can purchase. That will not go away, regardless of how we pay for it. Those patients will have to be looked after at some stage, be it through private medical insurance and private health care or through the NHS. It makes no difference. If the hon. Lady is saying that there should be better regulation of the services provided under medical insurance cover, that is an entirely different point, and it is not proposed in the Budget. I shall return to my point and then deal with my constituency in particular.

BUPA has suggested a likely lapse rate of about 30 per cent., which would mean that 180,000 people would become reliant on the NHS. That probably translates to between 40,000 and 50,000 hospital episodes—when people have to go to hospital for treatment that they would previously have had under private medical insurance cover.

What will the impact be in my constituency? I said at the beginning that I should declare an interest. I should declare a further interest in that Worthing has the largest pensioner population in the country, and West Sussex has the highest density of pensioners with private medical insurance cover. The hon. Member for Colne Valley (Kali Mountford) may be interested to know that this measure impacts on my constituency one heck of a lot.

I do not want to trade numbers over mailbags, but this is a significant issue and it has come before me time and again, both before and after the election. I do not say that it has suddenly come out, but a very real fear has been put around. Perhaps that is why there was such a reduced swing against the Conservatives in my constituency—but I shall not press that point.

The people who have private medical insurance, particularly those in Worthing, are not rich. They are people who were previously on average earnings and are of average means. They live in modest bungalows, particularly those in parts of Worthing. In Worthing, more than 1,000 pensioners have private medical cover with BUPA. That is a lot of people, just in the borough of Worthing.

As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb)—just up the coast from me—said, cataract and hip replacement operations are some of the most frequent treatments required by pensioners. The waiting list for those operations has gone up to 18 months and is worsening. [HON. MEMBERS: "Whose fault is that?"] We looked in the Budget for the great panacea that we were promised for all the ills of the national health service, but any additional money, which in any case works out less than the additional money that the Conservative Government added last year, will not come into effect until next year.

The Government have done nothing about the crisis that may afflict the people of Worthing and other high-density pensioner populations this winter. It is entirely in the Government's hands and remit to decide whether to act now.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I should like to continue my point. I have given way several times.

I should also mention that elderly people have the least time available to wait, yet they are denied the opportunity to speed up their treatment by using money from their own savings, and must queue up with everybody else for the national health service. That will not improve. We know the demography of the population. We know that it is an aging population. At the moment, there are about 3.2 working people for every pensioner. In 30 years' time, there will be about 2.5 working people for every pensioner. The problem is getting worse.

The irony is, as my hon. Friend the Member for Bognor Regis and Littlehampton said earlier, that there is no material gain to the Government or the Exchequer in this measure. The cost of the tax relief has been estimated in the Red Book at about £115 million, or £120 million, as my hon. Friend said.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire 6:15 pm, 16th July 1997

I understand that the hon. Gentleman has already declared a corporate interest in receiving the gift from BUPA for private medical insurance. Does he believe that it is correct, just and in the interests of the health service that the majority of pensioners in his constituency subsidise a very small minority who benefit from this relief? Indeed, does that not show that the Government are entirely right to remove it?

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

The fact that the hon. Gentleman referred to corporate private health care as a gift underlines that he has got this thing entirely the wrong way up. It is not a gift; it is a condition of employment on which many people pay tax at the marginal rate, as it is a benefit in kind, and contribute a great deal to the Exchequer. The hon. Gentleman is not taking account of the fact that people who enjoy private health care as a result of putting their own money into it are saving the national health service funds that it would have to devote to them were they solely dependent on the NHS.

That brings me back to the point I made right at the beginning—obviously the hon. Member for Eastwood (Mr. Murphy) was not listening. The tax relief does not outweigh the cost of the NHS treatment that it is there to cover. The sums do not add up.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I have already given way. I am repeating the point that I made earlier.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I shall continue. No doubt the hon. Gentleman will want to come back for another stab at this later.

Not only is the cost to the NHS of extra patients likely to be in excess of £100 million, but those patients will add to the waiting list, so waiting times will be pushed up. There will be a further cost in the insurance premium tax, which is likely to lose just over £8 million to the Exchequer, and a further cost in the revenue through NHS pay beds, which will not now feed through from pensioners who use private health care insurance for their treatment—an estimated cost of up to another £20 million.

If all those figures are taken into account, certain people make a very credible case for how much the measure will cost the Exchequer, not only financially but in terms of the great misery that it will cause people who have saved hard and used their moneys as they saw fit: that rug has now been neatly pulled from beneath them. Yet Labour Members accuse Opposition Members of not making firm proposals. We have made some firm proposals, but Labour Members have ridden roughshod over suggestions to adapt the scheme. They have made no attempt to suggest how we might broaden the age band, if the Government are really determined to change the current tax relief. There has been no attempt to suggest that the tax relief rates should be reduced.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I shall give the hon. Gentleman a chance.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

I thank the hon. Gentleman. I wish to raise a different point, as he has moved on. I understand that, in 1994, the previous Government brought about changes. Did the previous Government have consultations such as those identified in the amendments this evening, or did they simply ride roughshod over the opinion of the constituents whom the hon. Gentleman now represents? I would appreciate an answer.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

There is a considerable difference between adapting the rates of tax relief that are available—that has happened in many other contexts; we were talking about MIRAS yesterday—and, in one fell swoop, abandoning it altogether, with no prospect of its return under the present Government and no possibility of pensioners' being able to make up the amount from other sources. There is a heck of a lot of difference between a marginal change and abandoning tax relief altogether. I think that the hon. Gentleman knows that full well.

The First Deputy Chairman:

Order. The hon. Member for East Worthing and Shoreham (Mr. Loughton) is not going to give way.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I detect in the hon. Member for Eastwood the qualities of a pretender to the throne of the architect of the endogenous growth theory, one Ed Balls. It seems that a missive has gone out from Mandelson towers to the effect that Balls-speak—or should I say "speak Balls"—is now the order of the day as far as new Labour is concerned.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I shall be delighted to give way to the hon. Gentleman if we are to hear yet another version of what I have just alluded to.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

I only rise to speak when the hon. Gentleman's comments bear some comparison with the name of the colleague of mine whom he mentioned earlier—Mr. Balls.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

I am afraid that I am entirely lost. I shall continue with my speech before the entire Committee goes to sleep.

The Government have made no attempt to broaden the age bands. They have made no attempt to come up with a compromise in the form of a reduction in tax relief rates; we did that. They have made no attempt to phase out the current arrangements gradually. People are being left in the lurch as the Government introduce this measure by means of one of their familiar guillotines.

There have been further inconsistencies. The Government are prepared to subsidise false jobs—jobs that will no doubt turn out to be short term and ineffective—through the windfall tax, but they are not prepared to give a tax subsidy to those who are happy to put up the money themselves and, indeed, do the NHS a service by making their own arrangements. The measure will only exacerbate the problems of the NHS, while depriving people of choice and undermining their self-reliance and independence.

This is a mean, dogmatic measure. It is another case of cutting off the nose to spite the politically correct face, and—as I said at the outset—a further onslaught on minority interests. I firmly support the amendment.

Photo of Charlotte Atkins Charlotte Atkins Labour, Staffordshire Moorlands

There are more than 15,000 pensioners in my constituency. That is a high proportion. I have had many meetings with those pensioners, and have received many letters from them; but only one couple have ever spoken or written to me about this issue.

What concerns pensioners in my constituency is having to eke out an existence on a pittance. A third of pensioners are on means-tested benefits: that is a legacy of the last Government. What concerns them is that the NHS should be there when they need it, but the last Government's market policies have helped to destroy the NHS. Pensioners also live in fear of losing their homes because they cannot meet the cost of their long-term care needs without giving up those homes.

Why is tax relief not the burning issue that Conservative Members suggest it is? Why is my postbag not bulging with letters? Why have I not been telephoned every day about this issue, both before and after the Budget? Is it because it was only relatively recently—in April 1990—that tax relief was given to both basic and higher-rate taxpayers? As some of my hon. Friends have pointed out, that did not last long: by April 1994, tax relief at the higher rate was withdrawn.

Does that constitute a ringing endorsement of the scheme by the former Government? I think not. Does it demonstrate serious reservations on their part? I think that it does. We are seeing crocodile tears.

Between 1990 and 1997, the number of contracts increased by only 25,000, from 350,000 to 375,000. The Financial Secretary gave those figures earlier. The number of people covered by the contracts increased by 50,000 at the most. That is an increase of just 10 per cent. The last Government stated that tax relief was intended to encourage the elderly to take up medical insurance, but the 10 per cent. increase signifies not success but failure in those terms.

The situation must be seen in the context of a national health service that was being run down—a national health service that was consumed by stories of agism featuring elderly people who could not get the operations that they needed, and were not considered worth treating. An atmosphere of fear was created. In such a climate, if the number of people covered by contracts increased by only 10 per cent., I do not think that that was down to tax relief. The fear that the NHS was incapable of providing care from the cradle to the grave became an increasing reality during the 18 years of Conservative rule—yet the figure increased by only 10 per cent.

That suggests that the cost of tax relief is largely dead weight, benefiting people who had already taken out medical insurance or who would have done so anyway, rather than those who were encouraged to do so by tax relief. I understand that the cost of the relief last year was £110 million, and that it will rise to £120 million in the next full financial year. That amount cannot be justified—as I have said, it is largely dead weight—when schools and the NHS are crying out for funds. If the elderly decide that they want to be treated privately, that is fine, but the state should not have to foot the bill.

I appreciate that, in opting out of the NHS, the elderly are exercising their right to choice, but many elderly people decide to go private. A number of hon. Members on both sides of the Committee have talked about their parents. I will talk about mine, and, in particular, about my mother. She paid for a hip replacement operation some three years ago. Because of the excruciating pain that she was experiencing, she managed to raise the money to go into a private hospital. She had to wait for well over a year, and, at the age of 81, faced the prospect of having to wait for a further two years. She therefore decided to raise the necessary funds as best she could, and to meet the bill herself.

My mother did not get any tax relief. She received no benefit from the state. She decided to pay the bill herself: that was her choice, and I applaud it. It was her decision, backed by her family. We could see that she was in pain, that she was confined to her home and that she could not enjoy life. She could not go out for the walks that she had enjoyed every day of her life, because she could not walk. She therefore decided to find the money for the operation, but there was no subsidy from the state. My mother had to make the choice between finding the money and suffering the pain, because the NHS had failed to provide the service that she needed.

No person, young or old, should have to make such a choice, but, unfortunately, 18 years of Tory government have forced people to make that choice. My mother was lucky—she was able to raise the money with the help of her family—but, because of the parlous state of our national health service, she had to be treated privately. We should ensure that the state does not subsidise people who opt for private medical insurance. The money should be spent on the NHS, on schools and on services from which we know that everyone will benefit, not just on people who can afford to pay.

Photo of Mr Peter Brooke Mr Peter Brooke Conservative, Cities of London and Westminster

As you, Mr. Martin, have particular occasion to know, I sat here throughout the windfall tax debate yesterday hoping to speak on behalf of the City of London. I make no criticism of the fact that I was not called, and I know that you did your level best to ensure that I would be called. I mention it merely to make the point to new Members that one can just as easily be asked to sit through the whole of a debate and still fail to make a constituency speech when one has been in the House 20 years as after being here 20 days, 20 weeks or 20 months.

I apologise to my hon. Friend the Member for Daventry (Mr. Boswell) for not having been present when he opened the debate. I do not know whether he alluded to the fact that, like the MIRAS proposal, this measure was not in the Labour party manifesto. I am sure that it is pure coincidence that the measures directly relating to tax on individuals slipped out of the manifesto.

6.30 pm

I am over 60 and I do not have any private health insurance. I represent an inner-city seat, and it is a commonplace that such seats have a greater proportion of elderly people than do the generality of seats: that is certainly true of my constituency. The health service reforms were substantially directed to demography and to the growing numbers of the elderly. We have had a long debate in London on the availability and supply of hospital beds. Professor Jarman of St. Mary's hospital in my constituency has made a series of notable contributions to that debate, and I am delighted that he has been put on the Secretary of State's panel reviewing the position with regard to London hospitals.

You will rule me out of order, Mr. Martin, if I go on too long about long-term issues of the national health service in inner London. The resource allocation working party was established by a Labour Government, supported by the Liberal Democrats at the time of the Lib-Lab pact and endorsed by the Conservative Government in 1979. One of the consequences of RAWP was the serial closures of hospitals in London. There was bipartisan agreement for resources deliberately to be moved out of inner London to other sites across the country. Charing Cross and St. George's hospitals in my constituency had already been closed.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

I agree with the right hon. Gentleman about Professor Jarman's contribution. The right hon. Gentleman also referred to RAWP and the health authority funding formula. Does he accept that the problem of draining money out of London resulted from the Tomlinson report, which was commissioned by the Conservative Government?

Photo of Mr Peter Brooke Mr Peter Brooke Conservative, Cities of London and Westminster

I apologise to the Financial Secretary, but I do not agree with her. Westminster hospital in my constituency closed and moved its services to the new Chelsea and Westminister hospital at the end of the 1980s. The decision to merge the Middlesex hospital with University College hospital was taken well before the Tomlinson report. The Tomlinson report was responsible for the closure of St. Bartholomew's, and I shall come to that in a moment. There is a separate point about NHS accounting, which causes people in inner cities to subsidise the rest of the country twice, but that is by the by.

We are already in difficulty, because 30,000 of the 300,000 people in the Bart's catchment area are seriously disadvantaged by the move. That area covers my constituency, the constituency of the Secretary of State for what I will now call the Department of Culture, Media and Sport and the constituency of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). Elderly people went to live in the Barbican because of the NHS services available there, so their anger at the closure of Bart's was understandable. I acknowledge that that decision was made by a Conservative Government, so their anger was partly vented on me. The problem has been exacerbated by the present unsatisfactory alternative arrangements.

I draw attention to the straitened circumstances of the NHS in London. I am joined in that by London Labour Members, who have applauded the review that the Secretary of State for Health is undertaking. London is not well placed to absorb further strains. The establishment of a panel has been welcomed, and I can remember debates before the election in which London Labour Members called for a moratorium on hospital closures and an end to the practice of withdrawing hospital beds from London.

I acknowledge my ignorance, because I do not know how many of my elderly constituents who have private medical insurance—obviously, there are some—will transfer out of their present arrangements as a result of the proposed tax change. I have an 80-year-old constituent whose gross premium for himself and his wife is £3,105.46, with tax relief of £714.21.

The Financial Secretary said that the cut in VAT on fuel would benefit pensioners. I know that she knows that pensioners were, in fact, compensated for the original VAT on fuel, and I acknowledge that the cut in VAT will make a difference at the margin. If that is so, it must also follow that pensioners who have private medical insurance may also be affected at the margin if sums of some £60 a month are involved.

In her opening remarks in reply to my hon. Friend the Member for Daventry, the Financial Secretary said that the Opposition had had a good try. Imitation is the sincerest form of flattery. The Opposition have had long cause in the two months since the election to note the Government's enthusiasm for reviews in every possible direction.

Given the present problems of the national health service in London, I fear for all my constituents and not just for those who have private insurance, because we do not know whether the system can take the strain of patients transferring over. Like the hon. Member for Redditch (Jacqui Smith), I have constituents who have been waiting 18 months for operations. I am concerned about how many of those who do not have medical insurance will be adversely affected by the extra demand that this measure will create if the amendment is not carried.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

I am pleased to follow the right hon. Member for Cities of London and Westminster (Mr. Brooke). I have considerable respect for him and for his contribution in varied areas of government over many years. I enjoyed the informative nature of his speech and his analysis of London's health service. I want to direct my points primarily to the amendments, so I shall not respond to the specifics of the London health service, of which I do not claim to be a specialist. However, I shall talk about the plight and aspirations of Scotland's pensioners, who will be affected by the Budget.

The Government's plans on private medical insurance have been strongly welcomed by Age Concern Scotland and the Scottish Pensioners Forum, who speak on behalf of approximately 600,000 pensioners in Scotland. More particularly, I am certain that the more than 14,000 pensioners of Eastwood will strongly support the proposals in the Finance Bill. I have not yet received any communication or telephone call giving a negative view of our plans for private medical insurance. I shall not pre-empt what may happen this weekend, when I shall have eight separate advice surgeries, but thus far none of my constituents has criticised our plans—quite the contrary.

The Government's plans to reform the health service to ensure that more people have access to quality health care have been strongly welcomed. I am certain that today's announcement on GP fundholding will be mentioned in my constituency surgeries over the weekend. Labour is trusted on the health service, which is why the Opposition's genuine concerns will not be understood or felt by the constituents of Eastwood.

The announcement in the Budget was not a surprise, whatever Conservative Members may say. In 1989, the Chancellor—then shadow Chief Secretary to the Treasury—announced that Labour would introduce this measure if we were in government. More recently, in 1996 no less, the current Chief Secretary to the Treasury stated that we would reduce VAT on domestic heating to the lowest legal minimum threshold, and reduce the subsidies for private medical insurance. That was less than a year ago, and the assertion that it was not well known in advance shows a misunderstanding of what the Government are trying to achieve.

For two reasons, the proposal did not come as a surprise. First, the Chancellor said in his Budget speech that the arrangement had not worked and was still failing. It did not encourage widespread take-up of private medical insurance, although I understand that the Conservative Government introduced measures to try to increase the take-up, which had fallen throughout the 1980s. I understand that the measures in 1989 and 1990 were intended to bring some dynamism into the market for private medical insurance.

The second reason for introducing our measures relates to VAT on domestic fuel, and our approach should be compared with that of the Conservative Government. As I have said, their approach to the matter caused significant surprise. On 6 April 1994, they introduced changes to private medical insurance relief. It is incredible that Opposition Members have the audacity to demand of the new Government that which they did not have the confidence to present to Parliament when they were in government.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

I will give way later. The hon. Gentleman has the old hand's technique of coming to the Dispatch Box and asking to be allowed to intervene. I would be more responsive if the hon. Gentleman did not shout as he was approaching the Dispatch Box.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

I will give way to the hon. Gentleman on the Back Bench.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

I am sorry that my hon. Friend the Member for Daventry (Mr. Boswell) fills the hon. Gentleman with such fear.

How will pensioners in the hon. Gentleman's constituency benefit when any cut in energy costs will be reflected by state benefit adjustments in the following years? Pensioners in his constituency will have to give up their private health insurance and increase the waiting lists, but no account is taken of that in the Government's proposals. Pensioners will suffer. Indirectly, they will lose because of the abolition of the tax relief and they will gain nothing from the reduction in VAT on fuel.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

Unlike the hon. Gentleman, I shall respond to questions. During his speech, he refused point blank to comment directly on questions that were put to him. He spoke of my refusal to allow the hon. Member for Daventry (Mr. Boswell) to intervene. I have spoken three times in the Chamber and I have been interrupted on two or three occasions by that hon. Gentleman. The experience filled me with many things, but fear was not one of them.

The hon. Member for Guildford (Mr. St. Aubyn) spoke about waiting lists. As I understand it, the vast majority of those who are currently on private medical insurance had taken it out before tax relief was introduced. People are scaremongering by saying that, as a consequence of the Government's change, people will move to the national health service. People may be tempted to do that because the NHS will be safe in the Labour Government's hands and they did not believe that it was safe under the Conservatives, but there is no independent evidence to show that people on private medical insurance will seek service in the NHS.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

The hon. Gentleman should allow me to complete my answer to his first question before rising to ask another one.

The hon. Gentleman asked how my constituents feel about subsidies. My constituents, especially pensioners, have a strong sense of what is right and what is wrong. They strongly object to the fact that every one of them paid a subsidy into the coffers of BUPA and many other private medical insurance companies and received little or nothing in return. Because of underfunding and the mistreatment of our health service, more and more people were encouraged to take out private insurance. There was an unfair subsidy paid by the many for the few.

Photo of Mr Nick St Aubyn Mr Nick St Aubyn Conservative, Guildford

As the hon. Gentleman thinks that I did not answer his questions when I spoke earlier, I doubt whether he will understand what I have to say this time. The Government's proposals will indirectly reduce health spending and put the money into other areas. Anyone who is concerned about health spending must realise that Government support will fall and money will be redirected. That will damage the interests of everyone who relies on health provision.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire 6:45 pm, 16th July 1997

The hon. Gentleman's conversion to the interests of the national health service is illuminating, if a bit late. The Conservative attitude towards the NHS and the way in which it was not considered safe in their hands are two of the major reasons why we are in Government and why I have the privilege to serve the people of Eastwood. The hon. Gentleman alludes to concern about the treatment of the NHS and its funding. He has not read carefully the contents of Budget and health service pronouncements. The Chancellor in his Budget speech and other Ministers have clearly said that the health service is one of our priorities and that there is new money for it.

We should like to reach a situation in which there is no fertile ground for scaremongering and in which BUPA and others are not able to scare pensioners and others into a private system at the expense of the public system. I have given way twice to the hon. Gentleman and tried to answer his questions. He may not like the answers, but that is because we were elected on different manifestos and it would be hard to reconcile our aspirations.

Initially, BUPA and other private companies expressed some concern about the effects of our proposed changes. Those companies were aware of the changes because they commented on them before the election. If they were aware of the changes, it is strange that Opposition Members suggest that they were a surprise. The Opposition's attitude is directly parallel with their attitude to our welfare-to-work programme, which tries to enhance the opportunities for the many using the finances of the few.

As I said on Second Reading, the Opposition seem keener to protect the profits of the privatised utilities than are the utilities themselves. The direct parallel to that attitude is that Opposition Members seem keener to protect the interests of the private medical insurance companies than are the insurance companies. David Bryant is a senior representative of BUPA. As I have said, BUPA initially engaged in much scaremongering. It talked about the impact of our proposals on the NHS and said that tens of thousands or hundreds of thousands of people would move out of private medical insurance and into the NHS.

However, BUPA has revisited its analysis in a way that Conservative Members have thus far refused to do. David Bryant has said: There are always ways that increases can be alleviated. He believes, and BUPA seems to believe, that there are ways in which any difficulty can be alleviated. I do not claim to be a specialist on BUPA's finances, but I found out from the House of Commons Library that last year BUPA's operating profits went up by 7 per cent and that its reserves rose by 13 per cent. to a total of £638 million.

Like other hon. Members, I do not object to the fact that such companies exist and operate in a private market. What I object to is a system whereby a majority of the pensioners of Eastwood had to subsidise the minority to support the profits of BUPA and others. If BUPA's profits are affected as a consequence of our investing in and reorienting towards a public health service, David Bryant and others will, I am sure, understand our reasons for doing so. It is not the existence of these companies or of private medical insurance that I object to: it is the fact that the majority are being asked to subsidise the minority.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

This has been a revealing debate. I have been struck by the consistency of Labour Members in referring, without exception, to their passionate concerns about the public service. There is no doubt that their ability to project that to the electorate has probably put them where they are. However, there are some Conservative Members who share those concerns. Equally, some of us are concerned—even in our own long-term interests—that Labour Members may not have spotted that concern for the public service without an understanding of the means to improve it or to generate resources for it is likely to lead to disillusion, disappointment and electoral disaster in the long term. If they pump up people's expectations and then let them down, that is a sad fraud on the electorate.

Labour Members have suggested that the right hon. Nigel Lawson did not do much analysis in introducing the measures in 1990. Of course, there can be no substitute for experience. We now have seven years, analysis of the tax. We have the annual series. We also have substantive work from the Economists Advisory Group, to which I have referred extensively and which the Government should consider and respond to.

The next point shows the difference in philosophy between the two parties. If the hon. Member for Eastwood (Mr. Murphy) had allowed me to intervene, I would have said that there is a distinction between introducing a benefit that is given by tax relief and helps quite a large group of people, and withdrawing that benefit for some nugatory and speculative advantage for the NHS as a whole.

If the Opposition could show a real benefit to the NHS from these proposals, they might be in business, but I do not believe that they can—and the Chancellor does not believe it either, because he has assigned the money that he is saving from this measure to the reduction of VAT on fuel.

Photo of Jim Murphy Jim Murphy Labour, East Renfrewshire

I thank the hon. Gentleman, and this is the only intervention that I plan to make. He has suggested that there is no identifiable benefit to the health service from our plans. Will he comment on the benefits to the health service of the changes that the Conservative Government brought about in 1994?

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

What I do know, and we are discussing and debating the current proposals of the Chancellor, is that, whatever happens, the plans will throw more patients back on to the NHS without providing a single extra resource for it.

Perhaps I may continue with my remarks, which I have been anxious to curtail because we have had an interesting debate. In conversation with me, one of my colleagues—a former Treasury Minister, although wild horses would not extract the name from me—once described his experience as a Treasury Minister as the best postgraduate education in town. The Financial Secretary is coming on in a couple of respects. First, she is learning Trappism: if she does not say anything or respond to the debate, I suppose that she cannot upset anyone, which may in her terms be an advance. Secondly, along the way, she has learnt the meaning of dead weight: the whole substance of the argument of Labour Members, including the Financial Secretary in her short contribution, has been that there is some dead-weight cost—that the abolition of the relief will be cost-free, with no repercussive effects.

My hon. Friends and I mentioned some specific points and I said to the Financial Secretary that there was no absolute need to reply tonight, but they remain substantial and I hope that she will reflect on them.

Photo of Dawn Primarolo Dawn Primarolo The Financial Secretary to the Treasury

Did the hon. Gentleman read the explanatory notes on clauses? If so, he will have noticed that his questions with regard to contracts—including whether contracts entered into before 2 July would be honoured—are covered in the notes. The transitional proposals to cover those people are also detailed in the notes, as is a point that another Conservative Member made about a verbal contract and the honouring of contracts. If the hon. Member for Daventry (Mr. Boswell) had read the papers, he would know the answers to his questions.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Trade and Industry)

With the greatest respect to the hon. Lady, that is not a sufficient answer. I have posed some specific points, which she has not replied to in terms. The whole purpose of a Committee debate is for the Opposition and other Members to seek elucidation of the points. The hon. Lady may feel that she has given me those assurances, and I will look again at the notes on clauses to find out whether they are sufficient, but I do not believe that they are.

I will concede to the Financial Secretary that some policyholders will probably maintain their health insurance, regardless of the withdrawal of tax relief, if at the same time she will concede to me that some policyholders are likely to end their health insurance because of the withdrawal of that relief. The issue between us is the extent to which the measure will have real effect and the extent to which the NHS will face further pressures from the people who throw in the towel. That is why our amendment argues for a longer and more detailed analysis of the matter.

Treasury Ministers have been unable to offer that analysis. They did not submit it in the Red Book. They did not even get the figures right in the Red Book—they are entirely different from the number of people who are covered by private medical insurance. There is also a difference of opinion or doubt about the net costs of the measures. I instanced to the Financial Secretary some of our concerns: the return of policyholders to the NHS; the likely impact on resources for the NHS; the impact of the withdrawal of insurance premium tax; the loss of fee revenue from NHS beds.

In the absence of a clear Government outline of the effects, I am drawn back to what seems an authoritative and sober analysis by an independent agency—the Economists Advisory Group, of which I know the Financial Secretary is aware. That analysis showed that the measures could produce not savings, but net losses. I am not certain of that, but the EAG concludes that when the factors to which I have referred are taken into account the total extra costs of the measures could be 9.1 per cent. above the expected net savings. I am sure that the Financial Secretary does not intend that and that the Treasury does not wish it. I hope that it will not happen, but I do not have the information to refute it.

I am not arguing that Labour Members are not committed to the public services or that they would not wish to improve them, but it would be the greatest irony and it would disappoint them and their constituents if, after all this effort and after the damage to the livelihoods of the some 500,000 people who benefit from private health insurance, there were no savings at all, even possibly net costs, and no great benefit—no benefit that will sustain the NHS for more than the twinkling of an eye and no extra resources to cope with any additional waiting lists.

In those circumstances, we should press for further analysis before casting the 600,000 policy holders on to the tender mercies of the Chancellor. I advise the Government to reflect on the impact of their measures for longer and in more detail than they have done so far, and to withdraw them.

In that spirit, I invite my right hon. and hon. Friends to support the amendment.

Amendment negatived.

It being Seven o'clock, THE CHAIRMAN put the remaining Question required by the Order [14 July] to be put at that hour.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 332, Noes 181.

Division No. 59][7 pm
Abbott, Ms DianeBest, Harold
Adams, Mrs Irene (Paisley N)Betts, Clive
Ainger, NickBlackman, Liz
Ainsworth, Robert (Cov'try NE)Blears, Ms Hazel
Allen, Graham (Nottingham N)Blizzard, Bob
Anderson, Donald (Swansea E)Boateng, Paul
Anderson, Janet (Rossendale)Borrow, David
Armstrong, Ms HilaryBradley, Keith (Withington)
Ashton, JoeBrinton, Mrs Helen
Atkins, CharlotteBrown, Rt Hon Nick (Newcastle E)
Austin, JohnBrown, Russell (Dumfries)
Banks, TonyBrowne, Desmond (Kilmarnock)
Barnes, HarryBuck, Ms Karen
Barron, KevinBurden, Richard
Battle, JohnBurgon, Colin
Beard, NigelButler, Christine
Beckett, Rt Hon Mrs MargaretByers, Stephen
Bell, Stuart (Middlesbrough)Caborn, Richard
Benn, Rt Hon TonyCampbell, Alan (Tynemouth)
Bennett, Andrew FCampbell, Mrs Anne (C'bridge)
Benton, JoeCampbell, Ronnie (Blyth V)
Campbell-Savours, DaleGeorge, Bruce (Walsall S)
Canavan, DennisGerrard, Neil
Cann, JamieGibson, Dr lan
Caplin, IvorGilroy, Mrs Linda
Casale, RogerGoggins, Paul
Caton, MartinGolding, Mrs Llin
Cawsey, lanGordon, Mrs Eileen
Chapman, Ben (Wirral S)Graham, Thomas
Chisholm, MalcolmGriffiths, Jane (Reading E)
Clapham, MichaelGriffiths, Nigel (Edinburgh S)
Clark, Dr Lynda (Edinburgh Pentlands)Griffiths, Win (Bridgend)
Grocott, Bruce
Clark, Paul (Gillingham)Grogan, John
Clarke, Charles (Norwich S)Gunnell, John
Clarke, Eric (Midlothian)Hall, Mike (Weaver Vale)
Clarke, Rt Hon Tom (Coatbridge)Hall, Patrick (Bedford)
Clarke, Tony (Northampton S)Hamilton, Fabian (Leeds NE)
Coaker, VernonHanson, David
Coffey, Ms AnnHeal, Mrs Sylvia
Cohen, HarryHenderson, Doug (Newcastle N)
Colman, Tony (Putney)Henderson, Ivan (Harwich)
Connarty, MichaelHeppell, John
Cook, Frank (Stockton N)Hesford, Stephen
Cook, Rt Hon Robin (Livingston)Hewitt, Ms Patricia
Cooper, YvetteHill, Keith
Corbett, RobinHinchliffe, David
Corbyn, JeremyHoey, Kate
Cousins, JimHome Robertson, John
Cranston, RossHood, Jimmy
Crausby, DavidHoon, Geoffrey
Cryer, Mrs Ann (Keighley)Hopkins, Kelvin
Cryer, John (Hornchurch)Howarth, Alan (Newport E)
Cummings, JohnHowarth, George (Knowsley N)
Cunningham, Jim (Cov'try S)Howells, Dr Kim
Cunningham, Rt Hon Dr John (Copeland)Hoyle, Lindsay
Hughes, Kevin (Doncaster N)
Cunningham, Ms Roseanna (Perth)Hurst, Alan
Hutton, John
Curtis-Thomas, Mrs ClaireIddon, Dr Brian
Dafis, CynogIllsley, Eric
Dalyell, TamIngram, Adam
Darling, Rt Hon AlistairJackson, Ms Glenda (Hampstead)
Darvill, KeithJackson, Helen (Hillsborough)
Davey, Valerie (Bristol W)Jamieson, David
Davies, Geraint (Croydon C)Jenkins, Brian (Tamworth)
Davies, Rt Hon Ron (Caerphilly)Jones, Barry (Alyn & Deeside)
Davis, Terry (B'ham Hodge H)Jones, Ms Fiona (Newark)
Dawson, HiltonJones, Helen (Warrington N)
Dean, Mrs JanetJones, leuan Wyn (Ynys Môn)
Dewar, Rt Hon DonaldJones, Ms Jenny (Wolverh'ton SW)
Donohoe, Brian H
Doran, FrankJones, Jon Owen (Cardiff C)
Drew, DavidJones, Dr Lynne (Selly Oak)
Drown, Ms JuliaKaufman, Rt Hon Gerald
Dunwoody, Mrs GwynethKeeble, Ms Sally
Eagle, Angela (Wallasey)Keen, Alan (Feltham & Heston)
Eagle, Maria (L'pool Garston)Keen, Mrs Ann (Brentford)
Efford, CliveKennedy, Jane (Wavertree)
Ellman, Ms LouiseKhabra, Piara S
Ennis, JeffKidney, David
Etherington, BillKilfoyle, Peter
Fatchett, DerekKing, Andy (Rugby & Kenilworth)
Field, Rt Hon FrankLadyman, Dr Stephen
Fisher, MarkLawrence, Ms Jackie
Fitzpatrick, JimLaxton, Bob
Fitzsimons, LornaLepper, David
Flynn, PaulLeslie, Christopher
Foster, Rt Hon DerekLewis, Ivan (Bury S)
Foster, Michael Jabez (Hastings)Liddell, Mrs Helen
Foster, Michael John (Worcester)Linton, Martin
Foulkes, GeorgeLivingstone, Ken
Fyfe, MariaLivsey, Richard
Galbraith, SamLloyd, Tony (Manchester C)
Galloway, GeorgeLock, David
Gapes, MikeLove, Andrew
Gardiner, BarryMcAllion, John
McAvoy, ThomasRoss, Ernie (Dundee W)
McCafferty, Ms ChrisRowlands, Ted
McCartney, lan (Makerfield)Roy, Frank
McDonagh, SiobhainRuddock, Ms Joan
Macdonald, CalumRussell, Ms Christine (Chester)
McDonnell, JohnSalter, Martin
McFall, JohnSawford, Phil
McGuire, Mrs AnneSedgemore, Brian
McIsaac, ShonaShaw, Jonathan
Mackinlay, AndrewSheerman, Barry
McNulty, TonySheldon, Rt Hon Robert
MacShane, DenisShipley, Ms Debra
Mactaggart, FionaSimpson, Alan (Nottingham S)
McWalter, TonySingh, Marsha
Mahon, Mrs AliceSkinner, Dennis
Mallaber, JudySmith Rt Hon Andrew (Oxford E)
Marek, Dr JohnSmith Angela (Basildon)
Marsden, Gordon (Blackpool S)Smith, Jacqui (Redditch)
Marsden, Paul (Shrewsbury)Smith John (Glamorgan)
Marshall, David (Shettleston)Smith, Llew (Blaenau Gwent)
Marshall, Jim (Leicester S)Snape, Peter
Marshall-Andrews, RobertSoley, Clive
Maxton, JohnSpellar, John
Meale, AlanSquire, Ms Rachel
Michael, AlunStarkey, Dr Phyllis
Michie, Bill (Shef'ld Heeley)Steinberg, Gerry
Milburn, AlanStevenson, George
Miller, AndrewStewart, David (Inverness E)
Mitchell, AustinStewart, lan (Eccles)
Moonie, Dr LewisStoate, Dr Howard
Morgan, Alasdair (Galloway)Stott, Roger
Morgan, Ms Julie (Cardiff N)Strang , Rt Hon Dr Gavin
Morgan, Rhodri (Cardiff W)Stringer, Graham
Morley, Elliot
Morris, Ms Estelle (B'ham Yardley)Stuart, Ms Gisela (Edgbaston)
Morris, Rt Hon John (Aberavon)Sutcliffe, Gerry
Mountford, KaliTaylor, Rt Hon Mrs Ann (Dewsbury)
Mudie, George
Mullin, ChrisTaylor, Ms Dari (Stockton S)
Murphy, Jim (Eastwood)Thomas, Gareth (Clwyd W)
Norris, DanTimms, Stephen
O'Brien, Bill (Normanton)Tipping, Paddy
O'Brien, Mike (N Warks)Todd, Mark
O'Hara, EdwardTouhig, Don
Olner, BillTrickett, Jon
O'Neill, MartinTruswell, Paul
Organ, Mrs DianaTurner, Dennis (Wolverh'ton SE)
Osborne, Mrs SandraTurner, Desmond (Kemptown)
Pearson, lanTwigg, Derek (Halton)
Pendry, TomTwigg, Stephen (Enfield)
Perham, Ms LindaVaz, Keith
Pickthall, ColinVis, Dr Rudi
Pike, Peter LWalley, Ms Joan
Plaskitt, JamesWard, Ms Claire
Pollard, KerryWatts, David
Pond, ChrisWelsh, Andrew
Pope, GregWhite, Brian
Prentice, Ms Bridget (Lewisham E)Whitehead, Dr Alan
Prentice, Gordon (Pendle)Wicks, Malcolm
Primarolo, DawnWigley, Dafydd
Prosser, GwynWilliams, Rt Hon Alan (Swansea W)
Purchase, Ken
Quin, Ms JoyceWilliams, Alan W (E Carmarthen)
Quinn, Lawrie (Scarborough)Williams, Mrs Betty (Conwy)
Radice, GilesWills, Michael
Rapson, SydWinnick, David
Reed, Andrew (Loughborough)Wise, Audrey
Reid, Dr John (Hamilton N)Wray, James
Robertson, Rt Hon George (Hamilton S)Wright, Dr Tony (Cannock)
Wright, Tony D (Gt Yarmouth)
Robinson, Geoffrey (Cov'try NW)Wyatt, Derek
Roche, Mrs Barbara
Rogers, AllanTellers for the Ayes:
Rooker, JeffMr. David Clelland and
Rooney, TerryMr. Jim Dowd.
Ainsworth, Peter (E Surrey)Hague, Rt Hon William
Allan, Richard (Shef'ld Hallam)Hamilton, Rt Hon Sir Archie
Amess, DavidHammond, Philip
Ancram, Rt Hon MichaelHancock, Mike
Arbuthnot, JamesHarvey, Nick
Ashdown, Rt Hon PaddyHawkins, Nick
Atkinson, Peter (Hexham)Heald, Oliver
Baker, NormanHeath, David (Somerton & Frome)
Baldry, TonyHeathcoat-Amory, Rt Hon David
Ballard, Mrs JackieHogg, Rt Hon Douglas
Beggs, Roy (E Antrim)Horam, John
Beith, Rt Hon A JHoward, Rt Hon Michael
Bercow, JohnHowarth, Gerald (Aldershot)
Blunt, CrispinHunter, Andrew
Body, Sir RichardJack, Rt Hon Michael
Boswell, TimJackson, Robert (Wantage)
Bottomley, Peter (Worthing W)Jenkin, Bernard (N Essex)
Bottomley, Rt Hon Mrs VirginiaJohnson Smith, Rt Hon Sir Geoffrey
Brady, Graham
Brand, Dr PeterJones, Nigel (Cheltenham)
Brazier, JulianKey, Robert
Breed, ColinKing, Rt Hon Tom (Bridgwater)
Brooke, Rt Hon PeterKirkbride, Miss Julie
Browning, Mrs AngelaKirkwood, Archy
Bruce, lan (S Dorset)Laing, Mrs Eleanor
Bruce, Malcolm (Gordon)Leigh, Edward
Burnett, JohnLetwin, Oliver
Burns, SimonLewis, Dr Julian (New Forest E)
Butterfill, JohnLidington, David
Cable, Dr VincentLilley, Rt Hon Peter
Cash, WilliamLloyd, Rt Hon Sir Peter (Fareham)
Chapman, Sir Sydney (Chipping Barnet)Luff, Peter
Lyell, Rt Hon Sir Nicholas
Chidgey, DavidMacGregor, Rt Hon John
Chope, ChristopherMacKay, Andrew
Clark, Dr Michael (Rayleigh)Maclean, Rt Hon David
Clarke, Rt Hon Kenneth (Rushcliffe)Maclennan, Robert
McLoughlin, Patrick
Clifton-Brown, GeoffreyMajor, Rt Hon John
Collins, TimMaples, John
Colvin, MichaelMates, Michael
Cormack, Sir PatrickMaude, Rt Hon Francis
Cotter, BrianMawhinney, Rt Hon Dr Brian
Curry, Rt Hon DavidMay, Mrs Theresa
Davey, Edward (Kingston)Merchant, Piers
Davies, Quentin (Grantham)Michie, Mrs Ray (Argyll & Bute)
Day, StephenMoore, Michael
Donaldson, JeffreyNicholls, Patrick
Dorrell, Rt Hon StephenNorman, Archie
Duncan, AlanOaten, Mark
Duncan Smith, IainÖpik, Lembit
Emery, Rt Hon Sir PeterOttaway, Richard
Evans, NigelPage, Richard
Faber, DavidPaice, James
Fabricant, MichaelPaisley, Rev lan
Fallon, MichaelPaterson, Owen
Fearn, RonniePrior, David
Flight, HowardRedwood, Rt Hon John
Forth, Rt Hon EricRendel, David
Foster, Don (Bath)Robathan, Andrew
Fowler, Rt Hon Sir NormanRobertson, Laurence (Tewk'b'ry)
Fraser, ChristopherRoe, Mrs Marion (Broxbourne)
Gale, RogerRoss, William (E Lond'y)
Garnier, EdwardRowe, Andrew (Faversham)
Gibb, NickRuffley, David
Gillan, Mrs CherylRussell, Bob (Colchester)
Goodlad, Rt Hon AlastairSt Aubyn, Nick
Gorman, Mrs TeresaSanders, Adrian
Gorrie, DonaldSayeed, Jonathan
Gray, JamesShephard, Rt Hon Mrs Gillian
Green, DamianShepherd, Richard (Aldridge)
Greenway, JohnSimpson, Keith (Mid-Norfolk)
Grieve, DominicSmith, Sir Robert (W Ab'd'ns)
Gummer, Rt Hon JohnSmyth, Rev Martin (Belfast S)
Soames, NicholasTrend, Michael
Spelman, Mrs CarolineTyler, Paul
Spicer, Sir MichaelTyrie, Andrew
Spring, RichardViggers, Peter
Stanley, Rt Hon Sir JohnWallace, James
Steen, AnthonyWalter, Robert
Streeter, GaryWardle, Charles
Stunell, AndrewWaterson, Nigel
Swayne, DesmondWebb, Professor Steve
Syms, RobertWhitney, Sir Raymond
Tapsell, Sir PeterWhittingdale, John
Taylor, lan (Esher & Walton)Widdecombe, Rt Hon Miss Ann
Taylor, Rt Hon John D (Strangford)Willis, Phil
Taylor, John M (Solihull)Wilshire, David
Taylor, Matthew (Truro)Woodward, Shaun
Taylor, Sir TeddyYeo, Tim
Temple-Morris, PeterYoung, Rt Hon Sir George
Thompson, William
Tonge, Dr JennyTellers for the Noes:
Townend, JohnMr. Malcolm Moss and
Tredinnick, DavidMr. James Cran.

Question accordingly agreed to.

Clause 15 ordered to stand part of the Bill.