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The Chancellor of the Exchequer (Mr. Gordon Brown): I have met BUPA and others. We estimate the cost of tax relief for private medical insurance at a billion pounds, almost all of which will go to those who are already on private medical insurance.
Mr. Cunningham : I thank my right hon. Friend for that answer and add my congratulations to those of others in the Chamber. What is my right hon. Friend doing to provide resources to ensure that the national health service remains free at the point of need?
Mr. Brown: When we came to power, we had to take difficult decisions on the uses of public expenditure. One of the decisions that we made was to abolish tax relief on private medical insurance for over-60s. That was a difficult decision, but all the evidence showed that in the nine years in which private medical insurance existed, a billion pounds had been spent and there had been no appreciable growth in the numbers of people on private medical insurance, but that the state was subsiding people who already had such insurance in the first place.
I cannot see how we can continue to finance both the development of the national health service and build the capacity in hospitals, with doctors and nurses being employed, and at the same time finance with a billion pounds of deadweight cost private medical insurance tax relief for people who already have such insurance. I suggest that the country has a choicewe can have a health service that is free at the point of need, where we invest in capacity, or we can spend money on private medical insurance. We will, at the same time as investing in the national health service, keep to the policy that puts the national health service, and not private medicine, first in this respect.
Mr. Tim Boswell (Daventry): Since the Chancellor announced the decision in 1997 to withdraw tax relief for older people in respect of private health insurance, can he tell the House how many older people have come off such insurance and what the costs to the NHS in current and capital terms have been in providing for those people in the public sector?
Mr. Brown: I will write to the hon. Gentleman with the figures. There was no appreciable growth in the numbers of people who took out private medical insurance when the tax relief was in place. I may say that the former Chancellor, Lord Lawson, said that the relief was not good value for money and merely meant health service inflation. He was opposed to it all along, as those on the Conservative Front Bench should be.
The Chief Secretary to the Treasury (Mr. Paul Boateng): My right hon. Friend the Chancellor receives periodic representations about the operation of the Barnett formula. The Government have no plans to change the formula.
Joyce Quin : My right hon. Friend will no doubt have seen the recent report of the Select Committee on the Office of the Deputy Prime Minister that recommended a review of the formula. The way in which the formula operates is politically indefensible on the doorsteps of voters in north-east England. Given that the formula is named after a former Labour Chief Secretary, will he not take the opportunity to introduce a new Boateng formula that is a great deal fairer to the nations and regions of the United Kingdom as a whole?
Mr. Boateng: I must resist that temptation, although I appreciate the kind thought. I know that my right hon. Friend takes a great interest in this matter. However, while I respect her view and that of the Select Committee, I do not share her analysis. The Barnett formula is transparent and well tried. There is no consensus about alternative funding arrangements, and existing arrangements have delivered to the north-east the second highest level of identifiable public spending in England. I think that that is something to be welcomed and appreciated by all.
Pete Wishart (North Tayside): Has the Chief Secretary had an opportunity to look at the latest edition of the Holyrood magazine? If he has done so, he will have found that the Secretary of State for Scotland has conceded that the Barnett formula is indeed a convergence formula. Does he agree with his right hon. Friend the Secretary of State, and does he believe that the best way of ending this futile debate about the formula would be to give the Scottish Parliament responsibility for collecting its own expenditure and to make it fully accountable for how it is spent?
Mr. Boateng: I cannot agree with the hon. Gentleman, who knows that examination of the figures shows that Scotland has done rather well out of the Barnett formula, as spending is 20 per cent. higher in Scotland. The reality is that the formula provides Scotland with a population-based share of comparable
Mr. Lindsay Hoyle (Chorley): Obviously, the north-east would welcome a change in the Barnett formula, but may I reassure my right hon. Friend that in the north-west we would benefit simply from its extension to cover both the north-west and north-east, so that we not only reap the same benefits, but do not end up with top-up fees?
Mr. Boateng: My hon. Friend is always a reassuring figure, but there is normally a sting in the tail, as on this occasion. I fear that I must resist his blandishments, too. The Barnett formula is delivering to all the regions and to the kingdom. If Conservative Members have any alternativethe Letwin-Flight formula, perhapswe should hear about it, because it would be about slash and burn and cuts, cuts, cuts; and we are not having that.
Mr. Rosindell : Does the Minister understand that since this Government came to power in 1997, their polices have been absolutely devastating for the hard-pressed homeowners of this country, with a 60 per cent. average increase in council tax and a devastating increase in stamp duty? When will the Government introduce policies that encourage, rather than discourage, home owning?
Dr. Brian Iddon (Bolton, South-East): Bearing in mind the Government's energy efficiency commitment, will my hon. Friend look again at the charging of VAT on refurbishing older properties and on do-it-yourself energy-saving products?
John Healey: My hon. Friend is a passionate and long-standing advocate of energy efficiency measures, and he will be aware that we are arguing with the Commission and our partners in the European Union for greater freedom to allow a reduced rate of VAT on energy-saving materials that people use on a DIY basis. We are still constrained by European rules that prevent some of the measures that my hon. Friend would like.
Mr. Andrew Tyrie (Chichester): Over the past five years, the Government have clobbered homeowners with massive increases in stamp duty that have resulted in a nearly fivefold increase in the total yield to more
John Healey: I sometimes wonder whether Conservative Members are living in the real world. As I said to the hon. Member for Romford (Mr. Rosindell), the Chancellor considers representations and makes decisions on tax as part of the Budget process. As for tax rises[Interruption.] The shadow Chancellor is shouting "60". The Tories treat this like a maths test for a seven-year-old. They go through our Budget documents looking for the plus signs and add them up, but they do not take into account the cuts in income tax, the pension credit, the working families tax credit or the child tax credit. The personal tax and benefit changes that have been made since 1997 have had a direct impact on householders, who are, on average, £775 a year better off: the poorest and those with children are better off still.
John Cryer (Hornchurch): Does my hon. Friend agree that council tax is fundamentally a regressive form of taxation because it was introduced by the Tories to replace Mrs. Thatcher's poll tax and is closely related to it? Will my hon. Friend the Minister consider making it more closely related to ability to pay, perhaps by extending the banding so that wealthier people in wealthier areas pay proportionately more?
John Healey: Questions about council tax bands and the ratios between them will form part of the analysis and decision making in the revaluation of council taxes that starts in 2005 and will affect bills from 2007.
I emphasise to my hon. Friend and Conservative Members that the average council tax per dwelling this year under Labour councils is £818, whereas under Liberal Democrat councils, it is £934 and £1,008 under Tory councils.