Broadstone has warned the government should resist the temptation of increasing rates on Insurance Premium Tax (IPT) at the upcoming budget, as such a move could backfire and make the NHS backlog even worse.
Rates on IPT have doubled over the past decade to 12%, with the standard rate increasing from 6% to 9.5% in November 2015 and further increased to 10% in October 2016 and then to 12% in June 2017.
Broadstone noted chancellor Rachel Reeves was considering options to fill an £18bn fiscal black hole, but said she must avoid the budget temptation increase IPT to support NHS and stimulate growth.
It added: “Rumours around pension reforms and measures on private equity investors and non-UK domiciled individuals suggest the treasury may need to widen its net to raise more revenues.”
It noted that IPT, which is levied on insurance products such as car, contents and health insurance – is a lucrative source of taxation for the government.
Employers have already seen healthcare costs rise by 15 to 25% on policies renewing this year, Broadstone said, with some firms seeing hikes of more than 50%.
It warned that a new IPT hike could see customers relinquish private medical insurance (PMI) coverage, further exacerbating the unprecedented NHS backlog, which now stands above 7.6 million people.
Brett Hill, head of health and protection at Broadstone, said: “An increase in IPT, on top of the significant premium hikes we have seen this year, could force employers to cut back on PMI coverage for their employees, forcing their employees back on to waiting lists and adding yet more strain to an already over-stretched NHS.“
In the 2023-24 tax year government raised a record £8.1bn, up by 11% on the £7.3bn generated in 2022-23, as insurance premiums experienced high inflation.
Broadstone said: “On top of premium inflation, the ongoing NHS crisis has led to a record number of individuals accessing private healthcare through PMI, with NHS waiting lists consistently exceeding 7.6 million cases.
“In fact, the latest data from the Private Healthcare Information Network (PHIN) shows that treatments funded through PMI have registered their second consecutive record quarter with Q4 2023 and Q1 2024 reaching 161,000 and 168,000 admissions respectively.”