§ 5.51 p.m.
§ Lord Bruce-Gardyne rose to call attention to the case for extending the entitlement of those of 65 years and above to offset the cost of their subscriptions to private health care insurance schemes, created by the Finance Act 1989, to include payments direct to medical practitioners and hospitals for private health care at the customer's choice; and to move for Papers.
§ The noble Lord said: My Lords, I feel that I should begin by apologising to the House for, as one might say, lowering the horizons of our discussions this afternoon. The noble Lord, Lord Callaghan, expatiated with great eloquence on the whole future of central Europe. Since then noble Lords have been considering the future of Hong Kong. The subject to which I want to draw the attention of the House for a few minutes is considerably more parochial. I want to call attention to the manner in which private health care schemes appear to cater, or fail to cater, for the requirements of their subscribers.
§ As some noble Lords may be aware, I do from time to time contribute to the popular press. I have done so for many years. But never in all my years of scribbling have I ever written anything which attracted such a mass response as an article I wrote in the Daily Telegraph in August of last year. It suggested that BUPA, the scheme of which I have experience and by far the biggest of the private health care schemes, was gravely disappointing and letting down its subscribers. The response was monstrous. For weeks and weeks I was inundated with piles of letters from retired folk who told of their woes and of the troubles they had had, particularly with BUPA but also with some of the other schemes. Time does not permit me tonight to attempt even a précis of all those letters—it is probably just as well that it does not —but I think it would be fair to say that one or two common themes emerged.
§ One theme is that when they reach retirement our senior citizens find themselves confronted with very rapidly escalating charges for private health care schemes and at the same time with very rapidly shrinking exclusion clauses. When they put in their claims they find that they have already exhausted the benefit on a particular line of their contract and that they are not covered for an illness, especially one with which they have already been afflicted. These are people who will have been members of BUPA or of other schemes for the whole of their adult lives and whose claims record on the whole will have been marvellous from the point of view of the schemes. Yet when they reach retirement and the time when their claims will possibly start to multiply, they find that the schemes are not very interested.686
§ This is a dangerous situation but dangerous for a particular reason. That is frankly the only reason why I have ventured to bring the subject before the House today. In last year's Finance Act the Government in their wisdom —I would say their "unwisdom" —saw fit to give a tax break for subscriptions to private health care schemes. I am very much against tax breaks in general and this one in particular. Leaving that aside, the trouble is that the tax break functions only if one joins a scheme; therefore, retired folk are more or less herded or corralled into membership of the schemes in order to get the tax break. Unfortunately, when they have done so they are liable to find that the schemes fail to live up to expectations.
For example, BUPA says in its main publicity material:
Once you are in the hands of your specialist BUPA will take care of your costs".
Will it indeed? As the immortal Lord Copper once said: "Up to a point". My own experience and that of the thousands of people who have written to me is that in next to no time one receives a little note saying that one's claim exhausts one's entitlement under the relevant section of the contract. For that reason the retired folk feel that they are being let down.
§ Secondly, they find that the contracts given them by the private health care schemes are extremely difficult to follow and to understand and that when they have queries it takes a long time to get answers. Quite often when they get answers they are subsequently revised —quite often in their favour, I do not deny that —but it is all deeply confusing for them, particularly when they are elderly and perhaps not all that fit, either physically or mentally. The result is that they feel they have been had. So long as no tax break was involved it was none of the Government's business and there would be no case for a discussion of this kind. However, once the tax break had been given it meant that the Government were committed to supervising the matter and ensuring that private health care schemes delivered the goods expected of them.
§ I should especially like to refer to a letter I received in August from a Mr. Rushton of Chester. I do so because in my view he had rather an interesting suggestion to make. Essentially his point was that if the Government were going to give a tax break for private health care cover, then they should go for the level of paying fees. In other words, they should say, "This tax concession will apply to any expenditure of the individual citizen's choosing" —that is, whether it be for participation in one of the health care schemes, a direct payment to a specialist, to a hospital or for a private ambulance, and so on —"made out of the individual's taxed income". He pointed out that in that way there would be no question of pushing people into health care schemes. They would be able to make an unimpeded judgment in the light of arrangements which suited them. I found that argument most convincing. Mr. Rushton also pointed out, quite fairly, that such an arrangement would be far more in conformity with the 687 Government's general philosophy than a narrow specialised concession restricted to schemes.
§ Therefore, in September I forwarded the above suggestion to the Financial Secretary to the Treasury, Mr. Peter Lilley. He was kind enough to reply to me on the matter. Basically he said that, unfortunately, to extend the concession to cover all forms of expenditure by individuals on private medicine would be expensive and that it would also involve much more additional bureacuracy in order to check claims to ensure that they qualified. He said that the department would need convincing that the proposal would not increase bureaucracy gratuitously.
§ Mr. Lilley's essential theme was that because there were watchdogs in the area, the way in which organisers of schemes tended to the needs of their clients would be carefully supervised. I do not honestly think that it amounts to careful supervision when we have BUPA telling potential subscribers in its "come hither" material that, "Once you are in the hands of a specialist, BUPA will take care of you". In my experience, and that of others, this has demonstrably not been the case; indeed, it is quite untrue.
§ Mr. Lilley also suggested that thanks to the tax concession, the market for private health care insurance would expand enormously and that that would provide greater choice. He said that retired citizens could, as he put it, "shop around". Quite honestly, I am not sure how you can shop around in the matter of private health care schemes. If you are in a scheme you cannot rush around investigating other schemes to see whether there is one which would suit you better. In my view that is a somewhat unrealistic situation.
§ I shall conclude on a political note. It relates to a matter about which I am most concerned. I think that by giving this concession exclusively to health care schemes and thus assuming responsibility, —tangentially, at any rate —for the performance of the schemes, the Government are taking the risk of leaving many senior citizens with the feeling that they, not the schemes, have led people up the garden path.
§ I hope that my noble friend when he replies will be able to offer some hope that the firm rejection which I received from my honourable friend Mr. Lilley, which was a masterpiece of Inland Revenue drafting, is not the end of the matter and that the Government will be prepared to look again into the subject. I should say that I am most grateful to my noble friend the Minister for coming to the House today in order to reply to the debate. I beg to move for Papers.
§ 6.6 p.m.
§ Lord Rea
My Lords, I was only stung into putting my name down for this debate yesterday when I saw that no other health professional was speaking. I am not a health economist but I think that a view from within the National Health Sevice is appropriate.
When the Chancellor of the Exchequer allowed health insurance premiums of older people to be claimed as a tax allowance, many people felt that 688 this was the thin edge of the wedge and that soon tax exemption for all private medical expenses would be allowed. The noble Lord, Lord Bruce-Gardyne, now invites the Government to drive the wedge in just a little further—for the over 65s only. One reason for that, as he clearly pointed out —in fact this has been the whole tenor of his argument —is that health insurance premiums for elderly people are very expensive or impossible to obtain for those having reached that age and nearly as expensive and very limited in cover even for those who were insured before reaching the age of 65 years.
In fact the great majority of medical health care, especially expensive care, is received by those over 65 years. Therefore, we are talking about a group of the population which actually consumes most of the medical care in this country, although only a small part of that group would be able to pay for private medical care or indeed contemplate paying privately for complex medical care or for surgery. However, it could be that younger members of their family might help out financially and boost the number considerably if there was a tax spin-off as suggested by the noble Lord.
It is true that the National Health service has difficulty in caring for this increasingly large age group, the members of which have increasing expectations of good health. That is inevitable in our present demographic situation. I expected the noble Lord to suggest that a shift to private medicine —which such concessions may encourage —would be a relief for the poor old hard-pressed National Health Service, freeing NHS resources to look after NHS patients on waiting lists and so on who cannot afford private care. In my view we should look at that argument, even though the noble Lord did not put it forward. I think that he would agree that the cost of most private medical care item for item is rather higher than that for the same procedures carried out in the National Health Service; that is, those that have been costed. As an aside I might mention that the costing of most NHS procedures is not available despite the fact that the NHS changes contained in the Bill that is now in Committee in another place depend upon it.
If private medicine is encouraged to expand, a greater proportion of the GNP will go into health expenditure, which would constitute a drain on the economy. That could possibly be justified if the additional expenditure on private medical care was the choice of the patient paying the bill and if it left the NHS revenue intact, as it does now. I have argued in the Chamber and elsewhere that private practice as such, even without tax allowances, can harm the NHS; but I accept that in the present state of under-funding of the NHS some people will seek more time with the doctor, better facilities and more comfort and convenience and are willing to pay for them.
However, the noble Lord's affluent pensioner, while buying his private care and receiving tax rebate, will subtract revenue from the Consolidated Fund (out of which the NHS is financed) while having, for example, his coronary artery bypass graft (or "cabbage" as the operation is known in the trade).
689 The operation, which costs about £12,000 privately, would attract a tax rebate of £3,000 with a standard rate of tax of 25 per cent. It would cost the NHS more than that to do the operation. I have been given the figure of £6,000 for a coronary artery bypass graft as the NHS cost of the operation, so one could say that there will be a net saving to the NHS. That would be a faulty way of looking at the calculation. If, for instance, a cardiothoracic unit is functioning, the main cost is in buying and maintaining the equipment and paying staff salaries. They have to be paid for whether one or 1,000 operations are carried out. To divide the total cost of running the unit, which, let us say, is £2 million, by the number of operations (say, 330) makes each operation cost £6,000, as I said; but the marginal cost of each operation when the unit is operational will be much less and probably less than £1,000.
A further squeezing of the NHS, which the noble Lord's plan would involve, would make it become less efficient. The NHS needs core funding, however many operations are carried out. Would the noble Lord's well-off pensioner arrange for a private ambulance if he has a heart attack while awaiting his coronary artery bypass operation which is meant to avert it? Of course he would not. He or his wife would dial 999 and a NHS ambulance crew would take him to the nearest accident and emergency department. (In the present situation the ambulance crew would probably be doing it without pay. That often happens when I ask for an emergency ambulance to take one of my patients to hospital.)
There is a serious shortage of units to carry out bypass operations in the United Kingdom. That was pointed out critically by the Public Accounts Committee of another place last year. The noble Lord's suggestions would make if more difficult for the NHS to bring those facilities up to the proper numbers so that we could compare, for instance, with Spain, which has a better provision for coronary artery bypass operations under its health service than we do.
I am sure that the noble Lord realises that only a small proportion of the population would be able to take advantage of the scheme that he suggests. While I am sure that there are Members of the House who have had a hip replaced privately and are pleased with it, there are others who have had treatment under the NHS completely free which would have been prohibitively expensive privately. They have been pleased with the skill and dedication of those who work in the NHS, often at present under great difficulties. The noble Lord's suggestions would make those difficulties worse.
Those remarks come from one who has spent a professional lifetime working in the NHS. I shall therefore be interested to hear (I put in my notes "the reply of the noble Baroness" but I see that as this is a matter of finance we are to hear the Paymaster General, about which I am very pleased) what the noble Earl says. I do not believe that he will go down the noble Lord's path, much as I feel that his party's free enterprise principles might direct him. I hope that his reply will allow me to feel that on this issue at least the NHS is safe in his hands.
§ 6.15 p.m.
The Lord Bishop of Manchester
My Lords, I do not normally regard your Lordships' House as being a place of surprises, but I must admit that I have been surprised on two counts this afternoon: first, to arrive here from Manchester and to find that so few noble Lords had put their names down to speak in a debate which raises some fairly important issues, and, secondly, the pleasant surprise of hearing the noble Lord, Lord Bruce-Gardyne, introduce his Motion by saying that he is opposed to tax breaks in general. I was surprised and glad to hear that stated.
I do not propose to go down the path that the noble Lord outlined for us, despite the fact that many of us will have great sympathy with the correspondents whom he described as writing to him in large numbers about the difficulties in which they find themselves. I shall outline my reasons for that by taking the discussion a little wider, although the noble Lord, Lord Rea, has already mentioned the basic principles of the NHS, which is a point at which I would start. We want to look at the place of private health care in general in a society such as ours and then ask some fundamental questions about the role of government, especially in relation to taxation.
In regard to the principles of the NHS, we need to remind ourselves (do we not?) that the service, when set up, was set up for all those living in the United Kingdom. It is not meant to be a service for those who cannot afford to go private or who do not receive private health care as a company perk. Secondly, it is a service which is free at the point of need and of use. Any charges for the NHS —for example, for prescriptions —should be seen as aimed at reducing waste rather than raising money, or perhaps for comfort and privacy and those things which are additional to basic health care. Basic health care should be free at the point of need and of use. Thirdly, it is a service which is funded by taxation from the public purse, or by universal health insurance; and, finally, it is a service upon which decisions are made within a democractic, political framework. Those seem to me to be the fundamental principles upon which the NHS was se up and which all parties have stated they are prepared to defend.
A point which has frequently been made in debates in the House is that many of us would feel that the Christian attitude to the community in our society has been something which has had a profound influence on the shaping of the NHS in years gone past.
If we turn to matters of private insurance and health care we see that the principles upon which they are set out are fundamentally different, and inevitably they can form a challenge to the principles behind the NHS. That is not to say that they are bad principles. The idea that people should be prepared to provide for their own health care, and that of their families, as best they can is not necessarily a principle to be criticised, though I regard it as morally inferior to the principles underlying the NHS.
691 Inevitably private health care will flourish where there are deficiencies and inadequacies in public provision. People who have the means to do so will take advantage of private health care where they can. The inadequacies are seen in, for example, long waiting lists and the urgent needs of people to have operations done without waiting the long time which is demanded in the public service. It is a matter of great distress and shame to us all that there are long waiting lists in the NHS for certain types of operations, which encourages people more and more to go private.
There is always the danger of the emergence of two-tier health care: those who can afford to go private and do; and those who cannot. Private health care can of course be justified also in areas of health for which the NHS is not provided and which it does not pretend to cover. I think that we appreciate that there may be a place for it there.
However, private health insurance is undertaken by what is still a minority in this country —a minority of the comparatively affluent. The noble Lord, Lord Bruce-Gardyne, referred to a mass response which he received to an article he wrote —a great flood of letters. He mentioned the difficulties which our senior citizens face. By that I am sure that he meant a small minority, even today, of our senior citizens who face the difficulties that he outlined.
In a mixed society such as ours we value some freedom of choice. This is an important right for individuals to exercise on behalf of themselves and their families. But such freedom should never be at the expense of the community as a whole or of others. It should especially not damage the great basic principles behind the National Health Service. The argument is sometimes heard that if we increase the use of private health insurance it will relieve pressure on the NHS. I believe that that is a completely bogus and misleading argument. It ought to be thrown right out of court. Far from relieving pressure on the NHS, it tends to draw attention away from the fundamental needs of the NHS for proper resourcing and for remedying its inadequacies.
The growth of private health care which we have seen in recent years is already, I believe, damaging the NHS in many ways. It draws us away from the great principle of universal provision and of doing things together as a community. It means that those who legislate in this whole field are drawn from the minority of people who can afford private health care. I have no doubt that that affects their judgment in the field. A basic issue, particularly to many of us in the Churches, is that those who are the poorest in our society are damaged when the general provision of the NHS is affected in damaging ways.
What about the role of governments of any party, especially in relation to taxation: Their fundamental duty is to improve the NHS and not to give tax breaks and not to care for the private sector in this way. All the efforts of taxation should surely always be devoted to that purpose. We constantly hear that there are budgetary limits to the NHS. It has emerged, particularly in the present ambulance dispute, that there are cash limits which must not 692 be broached. Well and good; but if that is really so it is fundamental for government to collect all the money that they can in taxation and use it in the wisest possible way, especially in the field of health provision for our whole community. I was delighted to hear the noble Lord, Lord Bruce-Gardyne, criticise tax breaks in general. I am glad that he made that point and I hope that it is heard in government circles.
While the private sector should be recognised as a part of the life of this country. I believe that it is not the task of government to give it encouragement. It is quite naive to suppose that private health care can flourish and increase in this country without damaging the National Health Service. If I may make a personal reference on that point, I believe that the present Secretary of State has perhaps seen this. He has made the most of the fact that he and his family use the NHS. There is a story widely circulated —I have never heard it denied —that the Prime Minister has criticised the Secretary of State for Health for saying that he is using public facilities when he can afford to go private. That is a very dangerous argument indeed because it should surely be the duty of politicians in those positions to set an example in the use of the NHS, to show that they believe in it and that all the resources we can raise should be devoted to its improvement. It is a sad fact that the Government have encouraged private health care in recent years, and undoubtedly it has increased.
The Finance Act 1989 made provision for those on pensions, giving the equivalent of tax relief at the basic rate and reimbursing people over the age of 60 who take out health insurance. I believe that that was not merely a mistake but a very dangerous move. If it increased it could blow the whole NHS apart. I do not believe that that is extravagant language because we can see the principle being steadily eroded. The more this goes on, the more people in the community will say, "If I pay for private health insurance, why should I continue to pay for the NHS?" I hope that this will be reversed by this or a future government.
As regards the Motion of the noble Lord, Lord Bruce-Gardyne, I think he is inconsistent in, on the one hand, criticising tax breaks and, on the other, at the same time asking the Government to go still further. The noble Lord, Lord Rea, quite correctly said that this was simply pushing the wedge in a little further. It involves the Government yet more in the provision of private health care. I hope that when the Minister comes to reply he will be quite specific on the point and say that the Government are not prepared to go down the road.
§ 6.27 p.m.
§ Lord Monson
My Lords, I start by congratulating my noble friend —as in the literal sense he is —on his initiative in putting this interesting proposal before your Lordships' House so powerfully. As he reminded us, the whole idea of giving tax relief for the private medical expenses of the over-65s is controversial. We have had reminders of this several times this afternoon already. I for one certainly share those misgivings. On balance I concluded that they 693 are probably just about justified on the purely pragmatic grounds that they will take some of the pressure off the National Health Service over the next few decades during a period when the elderly, particularly the over-80s, will form a larger and larger percentage of the population.
The noble Lord, Lord Rea, may well be right in claiming that it will not take as much pressure off the NHS as the optimists imagine —I have to defer to his expertise in the matter —but he will surely conclude that it must take a little pressure off it, come what may. In any case, in consequence of the Finance Act 1989 these tax breaks are a fait accompli. There is nothing that I, the right reverend Prelate or anybody else can do about it.
I was delighted to hear the right reverend Prelate suggest something that I had not realised, I must admit. It was that the reliefs are to be limited to the basic rate of tax. I hope that when he comes to wind up the noble Earl will confirm that this is so. If that is the case, what a pity that tax relief on mortgage interest cannot also be limited to the basic rate of tax. That reform is long overdue.
The Lord Bishop of Manchester
My Lords, I thank the noble Lord for giving way. As a point of information, those paying tax at the higher rate must claim relief in the same way as on mortgage repayments. So I take it that it is not completely limited to that.
§ Lord Monson
My Lords, my optimism in that respect has to be dashed then. I hope that there will be time for the Government to think again about it and to limit this tax rate to the basic rate of tax. To do otherwise would be quite without merit.
Given that, willy-nilly, tax relief will be granted to the over 65s, whether it be at a top rate of 25 per cent. or 40 per cent., the question is, should it extend to direct payments to medical practitioners, as the noble Lord, Lord Bruce-Gardyne, has urged? In theory at any rate I should have thought that the answer was almost certainly yes. This Government have always been philosophically committed, in theory at any rate, to what has been described as "a level playing field" and to putting more decision-making into the hands of individuals. They are right to be so committed because the undesirable consequence of fiscal policies such as tax relief for pension contributions which concentrates too much power into the hands of institutions is already widely recognised.
Personal equity plans, for example, that were initiated by the previous Chancellor have been a great disappointment: I believe that that would be generally acknowledged. Most of them have failed to beat the various indices, mainly because of the high level of charges and commission deducted from both capital and accumulated income. If individuals had been allowed to set up and manage their own personal equity plans things might have been different and PEPs might have become much more popular and successful and had a favourable effect upon this country's balance of payments as more money would have been saved and less spent on consumer goods.
694 The same principle surely applies in the matter of providing for medical treatment, although I do not pretend that this has anything to do with the balance of payments. That is why the proposal of the noble Lord, Lord Bruce-Gardyne, deserves serious consideration. There is a further reason which has not been mentioned, which is that people who do not join a private medical insurance scheme until the age of 65 or over, either because they could not afford to until that point or because they have spent the whole of their working lives abroad, perhaps performing a valuable job in a Commonwealth country before returning to this country, find it extremely difficult to get any medical cover. As far as I know, there is only one private insurance scheme which covers entrants at the age of 65 or above.
A further reason still is that conventional medical insurance does not cover osteopathic treatment. As anyone with the slightest personal experience of the matter knows, on 80 or 90 per cent. of occasions when conventional medical treatment fails, whether combined with physiotherapy or not, osteopathy does the trick. Therefore it must be to the benefit of the nation as a whole and to the NHS in particular, as well as to the suffering individuals concerned, to permit any such scheme to cover osteopathic treatment.
The undoubted snag, which I believe was mentioned by the noble Lord, Lord Rea, is the extra costs that would be involved, as instead of a single insurance premium to be paid once a year every individual hospital or nursing home bill and every individual consultant's account would have to be carefully scrutinised. A host of additional civil servants would be required to perform such a scrutiny.
However, if some way could be found to overcome this undoubtedly difficult problem —there are always ways of overcoming problems if one tries hard enough —the proposal of the noble Lord, Lord Bruce-Gardyne, has a great deal to commend it, not least because it epitomises the individualistic "stand on your own feet" philosophy espoused by the party to which he belongs.
§ Lord Rea
My Lords, before the noble Lord sits down I should like to ask him a question. If I heard him correctly he said that if medical treatment fails, 70 or 80 per cent. of patients can have their condition put right by an osteopath. I should like him to give me the address of his osteopath as a number of my patients would be extremely grateful for that.
§ Lord Monson
My Lords, perhaps I did not make myself clear enough. I obviously did not mean that all medical conditions could be cured by an osteopath. However, I must say that in my experience and in the experience of a great many of my friends and acquaintances, where injuries to the back, limbs and joints have occurred, ordinary medical treatment, usually combined with physiotherapy, has not worked on more than half of those occasions. However, whenever we have seen an osteopath he has generally within a short time cleared up the condition in question.
§ 6.34 p.m.
§ Lord Wigoder
My Lords, it appears to me highly desirable that as chairman of BUPA, and after listening to the noble Lord, Lord Bruce-Gardyne, I should declare an interest in this matter. I make it clear that my position as chairman is one that I hold with pride. I view with pride the fact that among the 3.25 million people that BUPA covers, we can count the noble Lord, Lord Bruce-Gardyne, as a subscriber. However, I must say that we have other subscribers who occasionally bestow rather more praise upon us than the noble Lord.
In the course of the debate this afternoon it was apparently relevant —it must have been, otherwise the noble Lord, Lord Bruce-Gardyne, would not have said so —for the noble Lord to indulge in a series of criticisms of BUPA. As that is relevant to him, it must be relevant for me to reply briefly to those criticisms. The noble Lord said that he wrote an article in the Daily Telegraph which aroused a great response. I am not in the least surprised as that is a reputable newspaper. However, the article contained more misstatements and inaccuracies than any other article I have ever seen on the subject. It is hardly surprising that a large number of people felt themselves misled by what was contained in the article. They felt their position to be imperilled and they proceeded to write to the noble Lord.
I shall give three examples from his speech today of the kind of misstatements the noble Lord made. The noble Lord said that senior citizens faced not only escalating charges but additional exclusions. That is totally false. There are no additional exclusions of any kind applied to elderly subscribers. That is proved by the simple fact that among our millions of insured people we have a large number of elderly subscribers. Overall somewhere between 96 to 97 per cent. of the hospital and surgical claims that we receive are paid in full. Therefore any suggestion that there are exclusions and that as people get older they are not being covered in some way is quite inaccurate.
Further, the noble Lord repeated the expression which he has been touting around the countryside and which he used on Manchester radio this morning that in BUPA's brochure is a misleading statement which states that as soon as one sees a specialist BUPA will cover the costs. Out of a 20-page document the noble Lord selects one sentence. He ignores a previous observation in the document which states that,all the hospitals within your chosen scale will be covered in full by BUPA".The noble Lord ignores the fact that the sentence which he has extracted is not a sentence but only part of a sentence. The sentence reads:For instance, you are not covered for seeing a GP privately, but as soon as you have seen a specialist, BUPA will cover your costs".That only applies obviously if one is on the appropriate scale. The noble Lord ignores the fact that the very sentence he quotes comes from a paragraph headed:What BUPACare does not cover".696 The noble Lord ignores the next sentence following the one he quotes which states:You'll find a full list of costs not covered on page 19".To suggest that that statement is in some way misleading is merely to take a few words out of their context.
The noble Lord said that the document from which I have been quoting is difficult to understand. It is a complicated document as this is a complex subject. However, I claim with perhaps a little satisfaction that this very document received the plain English award from the National Consumer Council. I am happy to say that most people appear to have found very little difficulty in understanding its provisions. I shall leave that matter there because I am sure that the noble Lord and I would agree that it is not a matter of great relevance or of interest to your Lordships that we should exchange observations of this kind across the Floor of the House in a debate of this nature.
Perhaps I may come to the point which was raised —if I may say so, not entirely to my surprise —in particular by the noble Lord, Lord Rea, and the right reverend Prelate the Bishop of Manchester, questioning the value of a private sector in medicine. It may be —I do not know —that the noble Lord, Lord Bruce of Donington, may also have an observation of that nature to deliver.
The function of the private sector is two-fold. There is the philosophical function. It offers the citizen freedom of choice in an area where exercising that freedom will not damage other people's freedom of choice. Secondly, and much more importantly in a way, it provides a very real contribution to the health care of the community.
The fundamental problem with having a National Health Service which the private sector entirely supports is that it is impossible to have a centrally-funded tax-based system of health care which will provide completely for everybody's needs. Whether the provision of the present Government be adequate or whether the provision that the Opposition would propose be adequate, I do not believe there is any politician in any party who could put his hand on his heart and say that there is the remotest possibility in the foreseeable future of the NHS providing first class treatment, in reasonable conditions with the latest equipment, to every member of the community as soon as he or she needs it. It is simply not possible, partly because of the vast increase in technological costs, partly because of the fact that people's expectations have risen so rapidly, and partly for the demographic reason that there are so many elderly people now in the community.
In those circumstances, where there is that position and where state resources are always going to be inadequate. I give way—
The Lord Bishop of Manchester
My Lords, I thank the noble Lord for giving way. If one accepts his premise that it is impossible to satisfy the needs, is he really saying that the needs should be satisfied of those who possess the financial resources and not determined on other criteria?
§ Lord Wigoder
My Lords, all I am saying is that where the needs cannot be satisfied by the state it is in the public interest that there should be an increase in the amount of resources devoted to the health care of the community. If that volume of resources cannot be forthcoming from the National Health Service alone, it is very much in the interests not only of the NHS itself but of the community as a whole that it should be supplemented by every possible source. It seems to me self-evident that if the private sector, which is very small —it only covers some 5 million people at present —can be encouraged to grow, it is bound to reduce to some extent the number of people who are dependent on the National Health Service. That is self-evident. If that can be done it is equally self evident that the limited amount of resources necessarily available for the NHS can be applied to looking after a rather smaller number of people than would otherwise be the case. There is bound to be treatment available to them in those circumstances which is not available at present.
I venture to say that that is a simple fact which is recognised by everyone outside Westminster. It is recognised by everyone who is not a doctrinaire politician, a doctrinaire doctor or —if there is such a creature —a doctrinaire bishop. The professionals, the people who are actually engaged in delivering health care, are concerned with making sick people better. Throughout the country in hospitals, in medical centres, in industry with occupational health, doctors, nurses, pharmacists, physiotherapists and those who are somewhat less skilled, work quite happily side by side curing sick people without bothering their heads as to whether they are in the private sector or the NHS. Not only that; there is very substantial co-operation in training, facilities, equipment, laboratory work and so forth. It is not all one way because the private sector, although small, has made a substantial contribution in many ways to the progress and prosperity of the NHS. In addition to that co-operation there is a very strong element of competition, which is good for both sectors.
That deals with the people who work in the health field. What about the patients? I have heard and seen patients coming to after an operation. They say "Am I better?". They do not say "Doctor, am I in the state sector or the private sector?" It does not worry the patient in the least where he or she is. His or her concern is simply to get the best first-class treatment.
I knew that it would be impossible to hold this debate without someone using the words "two-tier system". Those words were spoken in due course. In some ways they constitute the "in" cliché in terms of health care. No one talks about two-tier motor cars, two-tier holidays or two-tier houses, but for some reason those words are constantly used with health care. Let me make it quite clear that if a two-tier system meant that people with money would get superior medical care I would be as much against it as the right reverend Prelate. It means only that the people who go private do so because, first they may want a particular consultant; secondly, they may want an operation done at a particularly convenient 698 time; thirdly, they may want particular facilities in the hospital; fourthly, and often very importantly, they may want privacy for themselves. The day has not come, and I hope it never will, when people go private because they will get better health care. There I agree with the right reverend Prelate.
If I am broadly right, as I believe I am, in saying that the private sector therefore has a contribution to make, the problem is how the growth of the private sector can be sensibly encouraged by a government. The answer is surely to increase the number of people who are medically insured. It would be possible to try to encourage people to cover themselves privately, but the costs are enormous and present experience is that much less than 1 per cent. of the population is involved in any attempt to use the private sector without medical insurance.
How does one encourage the growth of the private sector therefore? The answer comes down to the fact that there is a particular problem with elderly people. Any insurer has to link the likely risk against the claim. That has to be balanced out. It is a fact that once people get to their sixties their medical claims are four or five times as much as they were when they were in their thirties or forties. Therefore it is inevitable unless there is going to be a degree of cross-subsidisation, which would not be very desirable, that premiums for privately insured elderly people have to be substantially higher than those for younger people.
Not only do the premiums have to be higher because treatment costs are so much greater, but the rise in premium occurs all too often at the very time when those elderly people have ceased to work, have lost their regular salary and have started to live on a pension. That is a very real problem. There is a temptation for elderly people in that situation to leave the private sector and go back—as a burden, inevitably, to some extent —to the National Health Service.
That is where the Government's proposal for tax relief is crucial —for elderly people only. Neither I nor BUPA has suggested that it should be extended beyond elderly people. It will not encourage many people who are not at the moment insured to join, but it will encourage a large number of those who have joined to remain insured when they reach the age of 60 or 65 instead of drifting from the private sector back into the NHS. Every time those elderly people, through insurance, use a private hospital, it is a direct gain to the NHS and to the users of the NHS.
Perhaps I may turn finally to a point that has attracted little attention in the debate; namely, the terms of the Motion. The proposal of the noble Lord, Lord Bruce-Gardyne, seeks to extend to other elderly users of the private sector, who are not insured, tax relief similar to that which is extended to the insured. That is not a fanciful proposition. The noble Lord will be aware that it has been adopted in some other countries. Ireland is one example where it is extensively used.
Nevertheless, the proposal to extend the system in that way gives rise to certain problems. The first and principal problem is that those engaged in health 699 insurance very sensibly and properly seek to moderate the charges of the hospitals and doctors in order that premiums might be kept down and that the number of subscribers might increase; thus, the more subscribers, the larger the private sector, which is ultimately to the benefit of the hospitals and doctors who find themselves under some price restraint as a result of discussions and negotiations with the medical insurers. If the same relief were extended to those who go private but who are not insured, there would be no pressure in those cases for costs to be kept down. Medical inflation, which is already serious, might well rise even more rapidly and medical costs might go sky high. That is the danger of the noble Lord's proposal. It is not wrong in principle, but it may be undesirable in practice for that reason. There are also obvious administrative complications which are not for me to outline. If I am right in suspecting such complications, it is for the Government to indicate them when the noble Earl, Lord Caithness, replies.
In conclusion, tax relief for private treatment for non-insured patients is practicable. But there are practical dangers which do not make it a very attractive alternative. As to the matter with which I began, I thank the noble Lord, Lord Bruce-Gardyne, for bringing forward this apposite Motion. Perhaps I may suggest to him, politely and with the utmost goodwill, that what is in danger of becoming a vendetta between him and the organisation that I represent might perhaps now come to a peaceful and happy end.
§ 6.54 p.m.
Lord Bruce of Donington
My Lords, the noble Lord, Lord Wigoder, will forgive me if I do not enter in detail into the differences that have apparently arisen between the organisation of which he is the distinguished chief and the noble Lord, Lord Bruce-Gardyne. This is not the occasion to examine in detail the proposals made by the Government in the last Budget and enshrined in Sections 54 to 57 of the Finance Act by virtue of which those over 60 years of age have paid insurance premiums—that is what they are—to the various organisations concerned in BUPA. It would not be profitable to discuss the proposals now because the regulations which stipulate the details of the scheme that will come into operation on 5th April have only just been laid and will come to the House for discussion through the usual channel on the normal agenda of the House. That would be the occasion for the consideration of the proposals and the position of insurance companies and operators such as BUPA and Crusade Insurance.
Noble Lords will recall the first details of the Government's proposal to devote £40 million of the funds available to them for the purposes that they described. There was one press release on 14th March and another from the Inland Revenue on 15th July which was somewhat complex and which, I am told, BUPA and other insurance companies or providers of private health are still studying. There is also Order No. 23/89 which is itself a complex 700 document and has still to be discussed here. I do not wish to set out tonight the detailed arguments that I shall use at a later stage because it would be more appropriate to do so then.
The Motion of the noble Lord, Lord Bruce-Gardyne, is in two parts. The first refers to the scheme which comes into operation on 5th April by virtue of which, subject to various conditions, some £40 million will be paid on behalf of those over the age of 60 who qualify. That is a quite considerable sum of money. In general, the onus lies on those who put forward the scheme to prove that it is in the best national interest so to do. We should bear in mind that, if put into the National Health Service, £40 million a year would fund the employment of 2,000 extra nurses or the undertaking of 20,000 hip operations.
The arguments put forward by my noble friend Lord Rea and by the right reverend Prelate the Bishop of Manchester have some relevance here. If £40 million is available as it obviously is—otherwise it would not be given by way of relief—where should it go? What should the priority be? The noble Lord, Lord Wigoder, mentioned some reasons why individuals in possession of money sought to enter the private schemes or be covered by them. He mentioned greater convenience, privacy and a number of other factors.
One point that he did not mention was that it enabled people to jump the queue. That is the one thing that he omitted to say. Undoubtedly all that the £40 million relief, which quite clearly could have been available for other purposes, does is encourage people who are already in the upper income bracket. Not all people over 60 or 65 are in the upper income bracket. It enables them to jump the queue. It enables them to pre-empt resources that would otherwise be available for the National Health Service as a whole.
Indeed, it is particularly poignant when speaking of priorities to note that that £40 million concession goes to that section of taxpayers in the United Kingdom which has already been very well dealt with by previous Chancellors of the Exchequer by way of tax reliefs. It goes to those people who do not need it at a time when half that sum—half the £40 million—would have settled the entire pay rise claimed by the ambulance personnel, who are held in high respect in the United Kingdom. That is the pity of it. It is humbug to suggest that all the over-65s are on the same level and that they all have equivalent resources.
The noble Lord, Lord Bruce-Gardyne, in the course of his earlier remarks seemed to think that this measure would benefit all those over the age of 65. As he well knows, most of them have no resources which would entitle them to any kind of tax relief at all. The proposal itself is all the more immoral because everybody, including those who are in the schemes to which the noble Lord, Lord Wigoder, referred, are also in the National Health Service itself. Large numbers of those who subscribe to BUPA and the other societies at the age of 65 still get their prescriptions free from their ordinary medical practitioner. If it suits them, they attend the surgeries of their own general practitioner when they want 701 advice on a comparatively small matter or for a preliminary diagnosis. This relief simply gives encouragement to people to exercise the power of money.
§ Lord Wigoder
My Lords, the noble Lord will agree that those to whom he is referring, when they use the private sector are also paying their taxes for the National Health Service.
Lord Bruce of Donington
Yes, indeed, my Lords. That was the whole reason the National Health Service was set up in the form in which it was founded. It was thought by those who founded it—and I was very close to its founder—that it would be unfair to exclude from the National Health Service those who contributed by paying higher rates of tax. It was to be open to all. There was no question of excluding people of a certain income level. Indeed, as is well known, 99 per cent. of the population joined it.
As I said, we shall deal in greater detail with the BUPA position and that of the other societies when this House considers the order. Suffice it to say that there are certain areas which are still not covered by BUPA or any other society. First of all, there is a financial limitation on certain forms of treatment, which was referred to by the noble Lords, Lord Bruce-Gardyne and Lord Wigoder. One thing that BUPA and such societies do not undertake save under conditions of very high payment indeed—if at all—is cover for chronic illness that requires treatment over a protracted period of time. Care in cases of chronic illness that cannot be dealt with within two or three months or so is not covered by any of the existing schemes.
The second part of the noble Lord's Motion does not deal with the question of tax relief on premiums, which, as I said, is covered by the order to which I referred and which this House still has to discuss. It concerns tax relief on payments made by the patient direct to medical practitioners and others. My noble friend Lord Rea has already dealt with the health economics relating to direct payments. Quite clearly, if that were done it would further damage the National Health Service. It would further secure priority for people who can pay over those who unfortunately will still have to remain in the queue and cannot pay.
I do not know the extent to which the noble Lord, Lord Bruce-Gardyne, is in agreement with the Prime Minister on this matter. In a remarkable statement made at the end of July the Prime Minister delivered herself of the following observation:We shall make the National Health Service so good that nobody will want to go private".I must ask the noble Earl who will reply for the Government whether that is still official government policy. I have to ask that question because the Prime Minister used the word "we". I am not quite sure whether she was using it, as she sometimes does, in the semi-regal sense or whether she was using "we" to cover herself and her Cabinet. But if that is true, it would seem that not for the first time there is some dichotomy of thought within Her Majesty's Government. Quite clearly, if the Prime Minister 702 fulfils that intention and carries the Cabinet with her nobody will want private medical care. One can understand the reasons for that.
So the first question that I must ask—I should like the noble Earl to reply unequivocally—is whether that represents the policies of Her Majesty's Government. If it still represents the policies of Her Majesty's Government I then ask whether in the next Budget they intend to repeal Sections 54 to 57 of the Finance Act 1989 under which those privileges of tax relief were granted to that specified group of persons. On the other hand, if the noble Earl cannot confirm that such is the Government's policy, when does the Cabinet, to whose members I have referred somewhat irreverently in the past as hypnotised hamsters, intend to reproach her with the utterance that she made on its behalf?
Secondly, I should like to ask the noble Earl whether any estimate or assessment has been made of the likely cost of the extra relief proposed by the noble Lord, Lord Bruce-Gardyne, in having tax rebates on payments made direct by ordinary individuals ouside the health service. In that connection, although the noble Lord did not read out the entire letter that he received from the Treasury Minister, I was surprised at its mild and ambiguous terms. It seems that the Government's objection to the noble Lord's scheme lay not so much in its cost—although that was mentioned marginally—but in its administration. In administrative terms it would create extra bureaucracy and organisation, therefore there was something reprehensible about it.
Although the noble Lord did not reproduce the letter in its entirety, what surprised me, in particular in the light of the Prime Minister's observation, which has now become one of the sayings of the year, is that there was not an objection in principle by the Treasury to the proposals put forward by the noble Lord.
Our position on these Benches is quite clear. We object in principle to these matters. We object not only to the amendments to the service which have been incorporated in Sections 54 to 57 of the Finance Act 1989 but also to the proposals that have been put forward by the noble Lord today.
I speak for my party. We stand firmly behind the principles enshrined in the original National Health Service which was introduced by our Government immediately following the war: that there should be a universal service in which the needs of the individual would be the paramount consideration; and that it should be free, as the right reverend Prelate the Bishop of Manchester said, at the time of its use, to relieve any further anxiety that is the natural lot of those who find themselves ill in a variety of circumstances. We stand by those principles.
We quite understand that privately people may make other arrangements in order to secure treatments, possibly in different parts of the country, or by people to whom they have been recommended. We therefore do not object to the existence of the private sector. However, this much we insist upon. In the United Kingdom there are those who are not 703 blessed with great wealth, who are not fundamentally secure or enjoying the security that quite considerable possessions and higher salaries confer. In the fashion of the old hospices of the Middle Ages, the service should be primarily, although not exclusively, concerned with tending the sick, in particular those who are poor, cannot look after themselves and cannot afford private provision.
That is the essence of the social morality that should lie behind any health proposals and health service. Persons should not be asked—as I am afraid they are in other parts of the world after they are brought in, even after an accident—when they open their eyes, "Where is your credit card?" We do not want that kind of society here. We want a better society. The way in which we look after our health, and in particular that of the weaker and poorer members of our society, should give us the rating to which Britain ought to be entitled as a civilised society.
§ 7.15 p.m.
The Paymaster General (The Earl of Caithness)
My Lords, it was typical of the nature of my noble friend Lord Bruce-Gardyne that he introduced the debate in your Lordships' House this evening in the way that he did. If I may be allowed to say this to him, there was absolutely no need for apology. The noble Lord has raised an important matter. It has led to a most interesting debate. I am glad that so many noble Lords took part. Contrary to the right reverend Prelate, who would like quantity, I prefer quality; and often brevity leads to better quality. That is something that noble Lords are often rather good at.
I am pleased to have this opportunity to explain the provisions for tax relief on private medical insurance premiums, to be introduced this April, and to reply to the points raised. Some of those points were considered by us when the relief was introduced, and I shall deal with those general issues first.
The Government's general approach to taxation has been to cut the rate of tax and at the same time to reduce the number of tax reliefs and exemptions which influence individuals' choices and distort markets. However, our approach has been flexible, and we accept there may be certain areas where tax reliefs are justified to achieve specific objectives.
This new relief was announced as part of the Government's reform of the health service proposed in the White Paper Working for Patients, which was published on 31st January 1989. One of the themes of the White Paper was to encourage the public and private health sectors to work together, to learn from each other, support each other and provide services for each other. The intention is that, by encouraging the development of health services in the private sector, the diversity of provision and choice of health care will be increased.
The private health sector has grown significantly over the past decade, and a major factor in this growth has been the spread of private medical 704 insurance. Company schemes have played an important role in this, but we should not forget that half a million trade unionists have such insurance. The noble Lord, Lord Bruce of Donington, described them in fluent words as in the category of the upper income bracket; they have great wealth.
This growth has meant that since 1980 the number of people covered by private medical insurance has increased by some 50 per cent. to around 5.5 million people at present. This represents approximately 10 per cent. of the population. But if one looks at those people over 60 the percentage of those covered is only 5 per cent—half that of the population as a whole.
Part of the reason for that was clearly enunciated by my noble friend Lord Bruce-Gardyne and the noble Lord, Lord Wigoder. It is that when people retire they often find it difficult to continue their insurance cover. Because of their age, premiums tend to rise at a time when their income falls. It is precisely to counteract this problem, to help to overcome it and to enable people to maintain their insurance cover in retirement, that we are introducing tax relief on premiums for such cover, and that cover will of course affect the trade unionists. I know that the noble Lord, Lord Bruce of Donington, supports that.
I have mentioned that our general approach to taxation has been to cut the rate of tax but at the same time to reduce the number of tax reliefs and exemptions. Thus it would not be appropriate to introduce a general relief for private medical care and the measure that we have introduced is designed to address a specific problem; namely, that people often find it difficult to continue their insurance cover when they retire.
The relief then, is a limited measure to address that difficulty and will help people to make the continuing commitment to private medical cover in retirement. In contrast, the market for direct payment for medical services is well developed and one does not in general see the same increase with age in cost of an operation that one does with insurance premiums.
The relief serves a secondary purpose: to alleviate pressure on the NHS. Thus the types of treatment that can be offered are restricted to those that are more often carried out free within the NHS than in a pay bed or privately. In this way, those who continue to have their medical treatment within the NHS will also benefit, because—contrary to the views of the right reverend Prelate the Bishop of Manchester—the increasing numbers who choose to take treatment privately will help to reduce the pressure on NHS waiting lists. I know that the right reverend Prelate will forgive me for not following his thesis on the NHS. That is not because it is not interesting or important but because it is not the Motion on the Order Paper. It will not surprise him to know that I disagree with much of what he said.
Consistent with the targeted approach that we have adopted the relief will be available on premiums where the insurance contract covers an individual over the age of 60. The noble Lord, Lord Bruce of Donington, was right to remind us of that; 705 it is not over the age of 65 as appears on the Order Paper. I know that my noble friend Lord Bruce-Gardyne knows that the contract refers to the age of 60. It covers an individual over the age of 60 years, a married couple where one partner is over 60 or a group of people over 60. Relief is available even where a younger individual pays on behalf of someone over 60. Typically, this may be where a son or daughter pays the premiums for his or her parents. Relief is given at source like MIRAS for mortgages so that only a net premium will need to be paid to the insurer. It means that even where a subscriber is not liable for tax, relief will still be given. It also enables a small central unit in the Inland Revenue to administer the relief and minimise bureaucracy.
I should like to comment on the point raised by the noble Lord, Lord Monson. I confirm that the relief is not limited to the basic rate but applies to those on a higher rate in line with other tax reliefs.
To introduce a more general relief, as suggested by my noble friend Lord Bruce-Gardyne, for direct medical costs as against insurance premiums would not directly help the NHS. The scheme that he put forward is based on the letter that he received from Mr. Rushton and he was kind enough to provide me with a copy. The market for direct payments is, in any case, well developed.
There is a further point. It concerns the administrative difficulties of a general relief. The Inland Revenue would need to ensure that individual claims met the criteria for tax relief. Inevitably bills from hospitals, consultants and ancillary services would need to be verified. That would not be impossible but it would increase bureaucracy, By contrast, the relief that we have introduced will be administered by a small central unit dealing with medical insurers. I know that as a former Treasury Minister my noble friend may say that he has heard that revenue argument before. But that does not make it any less true.
My noble friend may not have a high opinion of medical insurers but the fact is that many people find it convenient to take out insurance in order to pay for private treatment. That is the route chosen by four out of every five people who use private hospitals. I suggest to your Lordships that that is hardly an indication that the service delivered by insurers is poor. Rather the figures indicate a successful sector and satisfied customers.
In general, contrasts of medical insurance do not provide unlimited cover for all possible ills. Similarly, they do not usually provide for long-term care but concentrate on the treatment of illnesses when they are in their acute stage. Schemes on offer vary considerably and there is now an excellent range from which to choose. I believe that that was the point being made by my honourable friend the Financial Secretary when he wrote to my noble friend. They vary from comprehensive schemes at one end of the scale to budget schemes which provide only limited cover at the other. An individual can select a scheme that best suits his or her personal needs both in relation to the level of cover required and the premium payable.
706 Private medical insurance has proved popular and the number of people covered increased by around 50 per cent. during the past decade. The measure that we have introduced will further increase its competition. The number and range of schemes on offer should also rise. This will improve the choice for the individual who should have little difficulty in finding a scheme that suits his or her particular circumstances. However, I believe that in that respect my noble friend Lord Bruce-Gardyne has a point. It is one which we all face when we join any scheme or look at any contract: one needs to be aware of what the contract offers. I have no doubt that, as with all other contracts, those who take out private medical insurance will wish to know what their benefits will be in advance of putting their name to the scheme.
I know that what I have said in answer to the question of the alleviation of direct costs will disappoint my noble friend Lord Bruce-Gardyne and the noble Lord, Lord Monson. But I wonder whether they can think of a scheme, cost the tax relief, assess the take-up and the benefit to the NHS, which is an integral part of our scheme, and the cost of administration. They will see how difficult it is to implement what appears to be a good idea. On top of that I know that my noble friend Lord Bruce-Gardyne, as a former Economic Secretary to the Treasury, would also wish to assess whether the money could be better spent elsewhere.
I turn to a question put by the noble Lord, Lord Bruce of Donington. It is difficult to assess the cost of the proposal put forward by my noble friend. It has not been possible to assess the precise cost without the necessary details I have suggested. However, the cost would be considerably more substantial than the £40 million for relief that we have introduced.
Like the noble Lord, Lord Bruce of Donington, I shall not follow down the path of the BUPA controversy. However, I should like to take up a point raised by my noble friend Lord Bruce-Gardyne. It is the question of whether the relief that we have proposed will push people into the arms of insurers who do not provide a full range of cover. Broadly speaking, the independent sector mirrors the NHS in providing a very wide range of treatments and services. But no individual hospital or nursing home in either sector is likely to provide the full range. We have always recognised that the private sector cannot do everything that the NHS can do but that is no reason why it should not take pressure off the NHS in areas where it can help.
In general, contracts of medical insurance do not provide unlimited cover for all possible ills. Similarly, they do not usually provide for long-term care but concentrate on the treatment of illnesses when they are in their acute stage. That is more to do with the nature of the insurance than with the range and standards of care which the private sector can and does offer. Schemes on offer vary considerably and there is now an excellent range from which to choose. As I have said, they vary from comprehensive schemes at one end of the scale to budget schemes which provide only limited cover at 707 the other. An individual can select the scheme that best suits his or her personal needs.
There may be individuals who find that their insurance is not as extensive as they thought. Indeed, my noble friend has referred to some advertising being misleading. Any advertising placed by medical insurers is subject to the same restrictions as that placed by any company and it can be dealt with by using well-established channels. In addition, the insurers are regulated by the Department of Trade and Industry which has a duty to check that the insurers are fit and proper to offer insurance. It is also able to investigate complaints from the public and, overall, the customer has very good protection. Many people find it convenient to take out insurance to pay for private treatment and that is the route chosen by four out of every five people who use private hospitals.
The noble Lord, Lord Rea, and the right reverend Prelate the Bishop of Manchester said that the cost of the tax relief will divert resources away from the NHS making worse the difficulties of the NHS. That point was picked up by the noble Lord, Lord Bruce of Donington. I reassure your Lordships that there is no question that the Government are not fully committed to the NHS. The Government have committed enormous resources to the NHS. Gross spending on the NHS for 1990–91 is bound to be some £28.8 billion. The projected cost of the tax relief in 1990–91 is only £40 million; less than 0.15 per cent. of the total NHS spending. The Government have made clear the fact that the NHS will continue to be available to all regardless of income and that it will be financed mainly from general taxation. I can certainly reassure your Lordships that the NHS is safe in the Government's hands and that we wish to maintain and improve the standards that it offers.
The noble Lord, Lord Bruce of Donington, stated that the NHS would benefit from a direct injection of £40 million. Who can dispute that? However, what was illogical in the noble Lord's argument was that he did not in any way try to assess the benefits to the NHS of the scheme which we propose. One of the effects of the relief will be to encourage individuals to take treatment privately rather than under the NHS. Such treatment will often be of the type where NHS provision is most under pressure. The NHS and those of us who continue to be treated by it will therefore benefit.
I thought that the noble Lord was in fine voice today. He waxed lyrical about the principles of the NHS. Those were fine words but, alas, one can look back and see that the Labour Party, whenever it was in power, organised its finances so badly that it could not give to the NHS the full resources that it needed in contrast to what this Government have been able to produce. I am sure that on reflection the noble Lord will see what a good job we have done for the NHS.
In conclusion, I am grateful to my noble friend Lord Bruce-Gardyne for raising this Question. I have carefully noted what he said about medical insurance but I remain convinced that to give tax relief for 708 direct medical expenditure is neither desirable nor practicable. However, I am convinced that we have a workable and worthwhile scheme which will get off to a good start in April. I look forward to discussing it in more detail with the noble Lord in due course.
Lord Bruce of Donington
My Lords, before the noble Earl sits down, will he answer the first question which I put to him, where, as he will recall, I gave him the citation and the precise words used by the Prime Minister in July last which has become the most renowned saying of the year? I asked the Minister whether what the Prime Minister said represents government policy and whether the Government stand firmly and squarely behind the statement that she made.
The Earl of Caithness
My Lords, as I have indicated already, the Government are totally committed to the NHS and to increasing resources.
§ Lord Bruce-Gardyne
My Lords, I thank all those who have taken part in this debate. Needless to say, my noble friend's reply did not entirely console me, but I hope that we can look at these matters further. In the meantime, I am very grateful to all those who have taken part and I beg leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.