Lord Neil Kinnock has urged Rachel Reeves to introduce VAT on private healthcare in this autumn’s Budget, arguing it would generate billions in funding for the NHS.
The former Labour leader believes that lifting the current VAT exemption on private medical services could secure “vital funding” for public services and would be “widely supported” by the public, according to the i paper.
Economic assessments indicate that even if private hospitals were exempted from VAT for services carried out on behalf of the NHS, the policy could still generate over £2 billion.
Reeves is currently considering which tax measures she might introduce in the Budget later this year. Tax increases are expected to be necessary to plug a gap in the public finances, attributed to sluggish economic growth and recent reversals on welfare policies and the winter fuel allowance.
Labour’s manifesto during the general election pledged not to raise taxes on “working people”, specifically ruling out increases to National Insurance, income tax across all bands, and VAT. However, removing the VAT exemption from private healthcare services might be a way to raise revenue without technically breaking that promise.
Labour could present the move as a way to shift more of the tax burden onto the wealthier segments of society.
The idea follows Labour’s earlier decision to apply VAT to private school fees, which was announced in January.
Last month, Kinnock entered the public conversation by advocating for a wealth tax, an idea that has since gained traction among several Labour MPs.
Now, he’s making a fresh appeal for Reeves to end the VAT exemption for private medical care.
“Introducing VAT on private health provision could provide vital funding for the NHS and social care,” Kinnock said.
“After 14 years of underinvestment, many people are turning to private healthcare not out of choice, but because they cannot afford to wait. This has increasingly led to unequal access to care.
“Ending the VAT exemption to generate much-needed revenue is a reasonable and widely supported step.”