Lord Kinnock’s latest tax crusade would punish patients

With almost every passing week of this Labour Government it seems yet another bad new tax is floated.

Lately, they have been coming from Neil Kinnock. 

As my colleague Henry points out, it takes quite the brass neck for the man who handed John Major the largest-ever popular vote in British democratic history (at the 1992 election) to now be suggesting an ever-greater reach of the taxman, but here we are.

Only a month ago, the failed Labour leader urged the Chancellor to consider a wealth tax – a policy that hardly bears arguing against, given that attempts in other countries have consistently failed. It just does not work.

Now he is back, this time to to helpfully push – much like Labour’s approach to add 20 per cent VAT to independent school fees – that private healthcare receives similar charges.

Kinnock argues that removing the VAT exemption on private healthcare would provide “vital funding” for public services, and be “widely supported” by the public – plus raise more than £2 billion. (Though as Dan Neidle sets out on X, that so-called raised money would end up costing the NHS, with VAT added on to the private services supplied to the NHS.)

Ditching the exemption, which applies to most private healthcare services, might seem like a neat escape hatch for Rachel Reeves, who is scrambling to raise taxes while bound by Labour’s manifesto pledge not to increase taxes on “working people” (defined by Labour as not increasing “National Insurance, the basic, higher, or additional rate of income tax, or VAT”).

The problem is, it won’t solve her fiscal headache that is, of course, much of the Labour government’s own making.

That is because private healthcare is not a societal ill. If anything it is a societal good, taking demand off the back of NHS services.

In a rare twist, I find myself inclined to agree with Nigel Farage on an economic issue: not only should Kinnock’s proposals be ignored, but something in the opposite approach be explored in giving people tax relief on their health insurance premiums. Elliot Keck of the TaxPayers’ Alliance suggests similarly: “Private school fees and private health insurance should be tax deductible, reducing your taxable income by an amount equivalent to what your expected average cost to the NHS/state school system (in the case of your child using it) would be.”

No matter what the Good Growth Foundation says (the left-wing think tank with close links to the government who backed Kinnock’s calls), it is not a hugely popular policy either.

They argue that the impact of the pandemic on the NHS and the resulting increase in waiting times has driven up demand for private healthcare, giving the sector a “windfall” in profits that merits additional taxation.

“The NHS is in a dire state: from 8am GP scrambles to months-long waits for cancer care, this is simply not good enough. People are being forced to go private for care they should get for free,” Praful Nargund, the former Labour parliamentary candidate who runs the organisation says.

Why you would then want to drive people back into a dysfunctional NHS to only further increase waiting times is anyone’s guess. Private healthcare is a choice; at times an attractive one. This punishes those both paying into the NHS system and deciding to ‘self-pay’ and pay for medical care themselves.

Deeming that people are being forced to go private and that it is better for them to reenter a system they’ve decided to leave – inevitably increasing cost for the NHS as those who previously went private return for treatment – is quite the Labour attitude; any choice that takes you further from the state should, of course, be taxed as fully as possible.

The growing number of patients opting to use private healthcare are unlikely to be best pleased.

YouGov’s polling shows Britons tend to be against charging VAT on private healthcare services, with 43 per cent opposing.

And there has been a well-documented surge in demand for private medical access, with latest figures revealing that in Q3 of 2024, private hospital admissions reached their highest rate in the third quarter of any year.

The thing is, this tax wouldn’t just be affecting the wealthiest in their private hospitals. It would end up applying to everyone who sees a private dentist or optician, meaning most of the public would end up hit.

I doubt they, nor the private medical professionals, nor the NHS, will be thanking Lord Kinnock if he has his way.