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Will spoonful of tax breaks make medicine go down?

The Conservatives have announced proposals to give substantial tax benefits to people paying for private medical insurance as a way of expanding the role of the private healthcare sector.

With a general election expected in the spring, the issue looks set to feature in the main parties&#39 campaigns.

The Tories have suggested that, if elected, they would scrap National Insurance for employers offering PMI cover to their staff. PMI premiums paid by employers would also no longer be treated as a benefit in kind for employees. The party claims the combined measures would save employers and their staff £468m a year.

The Government quickly slammed the proposal, claiming the move would simply offer a tax break to those who already have PMI cover rather than encourage take-up of new plans.

The Liberal Democrats echoed the condemnation, claiming the Tories are trying to score political points with an important issue that requires more reasoned discussion.

Tory health spokesman Liam Fox says the party would change the focus of the NHS to concentrate on cardiac and cancer treatments, which are some of the most expensive. Individuals would no longer have to take out all-inclusive PMI policies, meaning premiums could drop by up to 30 per cent, according to Fox.

He says: “We need not only the expansion of private provision of services but also an increase in private purchasing of services if the total capacity of our healthcare system is to be increased.”

By bringing the healthcare issue to the fore, the Tories could have given PMI providers the chance they have been waiting for to engage in a fruitful discussion with the political hierarchy about the role they will play in the future provision of healthcare.

Norwich Union Healthcare communications director Tim Baker says: “The private sector has a bigger role to play than it currently does. There is a great need for the public and private sectors to work together. I would encourage the Government to have a more open dialogue with the private sector.”

Baker welcomes the sentiment behind the Tories&#39 announcement but says it lacks details. He does not believe individuals will be motivated to take out cover by simply being offered a tax break.

The Liberal Democrats agree with Baker&#39s prognosis. Health spokesman Nick Harvey says: “We are not against using the private sector on the supply side. The problem is much of the money the Tories are saying they will throw at the private sector is actually dead money. The tax incentive will not work. Premiums are still too expensive to the average individual.”

Health Secretary Alan Milburn says: “The Tories&#39 plans to give tax breaks for existing employers providing healthcare would cost over £500m and that is before a single extra person took out private medical insurance.

This would drain taxpayers&#39 money out of the NHS simply to subsidise those already covered by private medical insurance.”

Standard Life Healthcare managing director Mike Hall disagrees. His company has been a leader in the debate over a public/private partnership for healthcare funding and he has been advocating a move similar to the Tories for some time.

Hall says: “My view is our products are good enough to sell themselves on their own merit without the need for artificial tax relief. But why should the Government be levying disincentives as they are currently?” Whatever one&#39s interpretation of the decision by the Tories, it should be seen by the industry as an opportunity to keep the conversation going with the decision-makers.

Hall says: “This is a wonderful opportunity for the Government to build a strong public/private partnership. I hope they take advantage of the situation.”

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