§ Mr. Nicholas BennettTo ask the Chancellor of the Exchequer (1) by what amount the private medical insurance premium tax offset rule reduced the revenue received from income tax in 1985–86 and 1986–87; and what is the estimated figure for 1987–88;
(2) how much the medical insurance premium tax offset rule would yield in the current years if it applied (a)for earnings of less than £12,500 per annum, (b) for earnings 446W of less than £15,000 and (c) for earnings of less than £20,000; and whether he has available any estimates of the yield in previous years.
§ Mr. Norman Lamont[holding answers 8 and 9 February 1988]: I assume that my hon. Friend is referring to the £8,500 earnings threshold below which employees are not in general taxable on benefits in kind provided by reason of their employment. These rules have applied since 1982–83 to private medical insurance.
It is tentatively estimated that the cost of exempting employees who earn less than £8,500 from tax on employer-provided private medical insurance premiums is of the order of £10 million in each of the years 1985–86 to 1987–88.
The table shows the estimated direct revenue yield in both 1985–86, the latest year for which data are available and the projected yield in 1987–88 arising from the taxation of the benefit of employer-provided medical insurance received by directors and by employees with earnings above the thresholds shown.
Earnings threshold Estimated yield 1985–86 Projected yield 1987–88 £ £ million £ million 8,500 58 80 12,500 49 70 15,000 45 65 20,000 29 50
§ Mr. Gordon BrownTo ask the Chancellor of the Exchequer what information he has on the average medical insurance premium paid per taxpayer in receipt of private medical insurance as a fringe benefit for the years 1978–79 to 1987–88; and how many taxpayers have been in receipt of such benefit.
§ Mr. Norman Lamont[holding answer 29 January 1988]: I regret the delay in answering this question.
Information is available in respect of the years shown. The benefit of employer-provided private medical insurance premiums was taxable for all employees up to 1981–82 but only for directors and for employees with earned income of £8,500 a year or more from 1982–83 onwards. The estimates of the number of recipients relate to the number of taxpayers liable to tax on the benefit and exclude employees earning below £8,500 per year where appropriate. The average premium is net of any contribution made by the employee to the employer.
Numbers Average net premium £ 1980–81 1315,000 100 1983–84 1530,000 150 1985–86 625,000 250 1987–88 2735,000 300 1 Excludes married women in receipt of the benefit. 2 Projection. These estimates are derived from the surveys of expenses and benefits. I regret that information is not available for the intervening years.
§ Mr. ChurchillTo ask the Chancellor of the Exchequer if he will estimate the annual cost of providing tax relief on private medical insurance.
§ Mr. Gordon BrownTo ask the Chancellor of the Exchequer how many people in receipt of medical insurance as a fringe benefit are currently eligible for tax 447W relief on the premium; what is the cost to the Exchequer of this relief; and what estimate he has of the projected cost to the Exchequer of extending eligibility to tax relief to all those covered by private medical insurance.
§ Mr. Norman Lamont[holding answers 29 January 1988]: I regret the delay in answering these questions.
The direct revenue cost, at 1987–88 levels, of giving relief at marginal rates of income tax on private medical insurance premiums, including contributions made by employees towards employer-paid premiums, is estimated to be about £150 million. If the benefit of employer-paid premiums paid on behalf of directors and of employees with earned income of £8,500 per year or more were also exempted from income tax, there would be an additional cost of £80 million. These estimates make no allowance for any behavioural changes. Granting tax relief on private medical insurance would be expected to lead to an increase in the number of subscriptions and to an increase in the cost of relief.
It is tentatively estimated that, in 1987–88, about 150,000 employees receive the benefit of private medical insurance from their employer but are not taxed on the benefit because their earned income is below £8,500 a year. The cost of this exemption is of the order of £10 million.