While all of us have been concerning ourselves with the practical, day-to-day impact of the Covid 19 pandemic, particularly the enforced lockdown, my thoughts have turned to the possible medium to long term implications for taxation, and from a healthcare industry perspective, Insurance Premium Tax.
In his Spring Budget the new Chancellor of the Exchequer, Rishi Sunak, left IPT untouched, announcing he would be undertaking a further review of the application and fairness of IPT, with the intention of announcing the outcome by the end of the year.
As a result, I have been tracking announcements and speaking with a number of our Corporate members to ensure AMII formally responds on any opportunity to comment on the fairness of IPT applied to healthcare spend.
Since then the devastating Covid 19 coronavirus has struck with all the challenges that such a crisis entails - not least upon our NHS and Social Care sectors - and the financial impact on employers, employees and the public at large.
As a result, the Government has thrown away the fiscal rulebook to provide the financial support packages which are required to protect our very existence.
Where the financial impact of Government support was estimated to be £55bn in the current year, last week the Office of National Statistics (ONS) announced it believes as a result of the extension to the furloughing scheme until October 2020, and a range of further measures, the cost will be £104bn for this year alone.
The ONS has previously said the spending measures alongside lower tax receipts could see the UK Government’s budget deficit surge to its highest in decades.
The Resolution Foundation has called for tax hikes to close the gap and new fiscal rules to reassure bondholders. Many analysts expect public appetite for further cuts to be limited after the crisis following a decade of austerity.
My personal view is the Government will have to consider a range of taxation measures as it seeks to rebuild its budget. Increases to Income Tax, initially at the higher rate but with an increase to the basic rate of tax following at some stage, and increases to National Insurance rates for employers being among the options.
Standard Rates of VAT in the UK are amongst the lowest in the EU at 20%. The range is typically between 21-27% with our close neighbour Ireland at 23% and Hungary the highest at 27%. I can see the standard rate of VAT being increased by 2 percentage points.
There has been a longstanding suggestion that IPT in the UK is equalised with VAT.
One could argue that IPT on private medical insurance and health cash plans represents an even more unfair taxation given the current restrictions to benefits caused by Coronavirus.
The danger is that HM Treasury see the equalisation of IPT with VAT as low-hanging fruit, irrespective of the value, which would be devastating for our sector and the consumer.
We are all agreed the NHS, and everyone involved in it, has been outstanding over the last few weeks. However, we must not forget the massive contribution private medicine and the independent hospital sector has contributed in handing over almost their entire capacity to support routine NHS treatment.
I do not think the Government will deploy all of those changes to taxation as one. To do so would merely stall our recovery and increase unemployment further than is already anticipated. More realistically they will adopt a phased approach.
At this point in time I suspect IPT is low down on their list of priorities. I just wanted you to know I am alert to the dangers and ready to respond on behalf of AMII members when the time is right.
Stuart H Scullion Executive Chairman, AMII