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Medical Insurance (Pensioner Tax Relief)

Volume 524: debated on Wednesday 2 March 2011

Motion for leave to bring in a Bill (Standing Order No. 23)

I beg to move,

That leave be given to bring in a Bill to provide for tax relief on medical insurance premiums for people above a certain age; and for connected purposes.

As a very part-time dentist, I must declare a possible interest, although I cannot quite see the link, and I had better also put in for a prospective interest, given that I age day by day and pension age might come upon me.

As in much of the south-east, life expectancy in Surrey is somewhat higher than the England mean. The average male life expectancy in England is about 78 and it is 82 for females. In Surrey, it is about 82 and 86 respectively. Additionally, the proportion of people aged 65 and over in my Mole Valley constituency is about 20% or slightly more—one in five.

Speaking as someone with a professional interest in health and as an MP observing my constituents’ health, it is obvious to me that longevity brings with it a high demand for health care and large demands on the health services, especially cardiac, carcinoma and orthopaedic services. A plane load of Surrey Saga tourists would really set the airport metal detectors buzzing as they passed through with their hip and knee replacements.

The Mole Valley constituency is served by three good NHS hospitals: the East Surrey, the Royal, and the Epsom. These hospitals have expanded in certain health areas to meet the increasing demand for elderly health treatment. The best example is the Epsom hospital special orthopaedic unit that carries out more than 3,000 hip and knee replacements annually—and the number is increasing. Almost all those 3,000-plus are elderly people from surrounding areas, including my constituency. Local medical problems have been looked at, but there has also been a call for an enhanced and enlarged cardiac unit at Epsom as part of the retention and refurbishment of the NHS hospital.

I provide those two examples as they represent a sample of the increased health demands for NHS health care that come predominantly from the over-65s. This is not special or specific to Mole Valley or to Surrey, but to a greater or lesser degree is nationwide for the 65-plus age group. In addition to being served by those three hospitals, my elderly constituents are served by private hospital services. Some are relatively local, but others demand travel to London and beyond.

Approximately 12.5% of the UK population are covered by private health insurance. Approximately 70% of that cover is corporate, leaving about 30% of it individual. At retirement, many people may wish to take over their corporate private health insurance, but the personal cost of course becomes a factor. Additionally, many who have personally funded their health insurance might not feel able to do so when a regular personal income is merely pension or savings. This means that, as the over-65s’ need for health care increases, individuals will increasingly turn to the NHS and absorb the facilities they would not have taken if they had been covered by their health insurance at a private hospital.

Before March 1997 when tax relief was available to the over-60s, it was estimated that tax relief was paid in respect of 400,000 contracts to cover 600,000 individuals. Over a seven-year period from 1990, tax relief for the over-60s cost £560 million. However, that included a period when the relief applied across all taxpayer rates. In 1994, this was reduced to apply to the basic rate tax only. Unlike my proposal, the relief started at 60, not 65, which affected the call on the taxpayer. The Western Provident Association estimated that 40% of pensioners would discontinue their private health insurance when the cut came into force in 1997. Which? reported in 2002 that private health insurance coverage was lowest for the high-demand 65-plus age group.

Those who choose to have personally funded private health insurance pay twice for their health—in premiums and tax. As I have already stated, this applies to 30% of those insured, as corporate payments cover 70%. However, it would be safe to assume that nigh on 100% of those aged 65 or more are personally funding their health insurance. It is their choice and, for many, it might mean sacrificing other things that affect their lifestyle.

My Bill would allow basic rate tax relief for pensioners at 65 and above, with the age rising as and when the pensionable age increases. It would encourage people either to keep their health insurance or to take out health insurance just as they reach the period in their life when demand can be expected to increase. If they did not have or ceased their insurance, they would add to the call on the national health service. The Bill in no way degrades my or their respect for the NHS, but is intended to take some of the load, in numbers and cost, off our tax-paid national health service. As the UK population’s life expectancy increases and as the wonders of medical research improve our pensioners’ life expectancy and well-being, this would provide an incentive for more people to choose not only to pay their taxes to support the NHS, but to use health insurance to take an increasing load off our NHS to the benefit of others.

Question put and agreed to.


That Sir Paul Beresford, Gavin Barwell, Mr Christopher Chope, Mr Geoffrey Cox, Mr Oliver Heald and Mr Gary Streeter present the Bill.

Sir Paul Beresford accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 18 March, and to be printed (Bill 157).