Another Lansley u-turn – this time over the “NHS privatisation tax”

Unite, the largest union in the country, have won their campaign against government plans to introduce a 14 per cent “NHS privatisation tax”. In its latest u-turn on the health and social care bill, the government has withdrawn plans to provide private firms with financial support when bidding for NHS contracts.

Research from Unite on the bill’s accompanying impact assessment showed that private providers would have been given a 14 per cent ‘leg up’, resulting in the taxpayer subsidising a £14 refund for every £100 private firms spent in the new NHS ‘market’.

The figure comes from a KPMG study cited by the impact assessment which showed that the majority of “distortions” in the would-be market would favour the NHS.

The study identified the three most significant “distortions” as:

• Tax: NHS does not pay corporation tax;

• Capital: public investment is much cheaper than private borrowing;

• Pensions: the private sector cannot access the NHS pension scheme, which would make it more expensive to provide equivalent benefits to staff.

It estimates that because of these and other distortions a private sector provider has a cost base 14 per cent higher than the NHS equivalent.

Unite assistant general secretary, Jennie Bremner said:

“This is a victory when coupled with health secretary Andrew Lansley’s intention to now rule out competition on price.

“But there is a lot further to go to save the NHS and this u-turn calls into question how this proposal was ever made. The government’s handling of this legislation has descended from muddle into shambles.”

The health minister said in committee:

“It has never been the Government’s intention to use this power to pay certain providers an increased tariff by virtue of their ownership status.”

However, a Unite spokesman told Left Foot Forward:

“It’s clearly there in black and white in the impact assessment that the government believe that the majority of quasi distortions favour NHS organisations and that they suggest that the “tariff methodology” be developed in such a way as to recognise the impact subsidies.

“They also say that the process should encourage “new entrants” and they are by definition not NHS providers and they want to encourage them to join the market in the first place and then help them once they are in.”