Unite reveals 14 per cent 'NHS privatisation tax'

17 February 2011

The government is planning a 14 per cent 'NHS privatisation tax' to help private healthcare companies take-over great swathes of the health service, Unite, the largest union in the country, said today (Thursday,17 February).

Unite, which has 100,000 members working in the health service, said that the 14 per cent includes taxpayers subsidising the corporation tax that the private healthcare companies will incur on the profits they make on their NHS contracts. Other elements include 'help' with pension provision and building costs.

Unite research has discovered that the Impact Assessment – which accompanies the Health and Social Care bill - indicates that private providers will be given a 14 per cent 'leg up' - for every £100 they spend in the new NHS 'market', the taxpayer will be made to refund them £14.

Unite's National Officer for Health, Karen Reay said: 'If this is mirrored across private healthcare company contracts worth hundreds of million of pounds, the taxpayer subsidy could be immense.'

'In a nutshell, this is a NHS privatisation tax specifically designed to help private healthcare companies gobble up lucrative NHS contracts for the benefit of their shareholders – some of the very companies that have donated £750,000 to the Tories since David Cameron became leader in 2005. There is a clear conflict of interest here.'

Healthcare companies that have financially supported the Tories include the TLC Group, IC Technology, Sovereign Capital, as well as the wife of former chairman of Care UK (which gets almost all of its business from the NHS). Private hospital chain, Circle sponsored a fringe meeting at the Tory party conference addressed by Health Secretary, Andrew Lansley.

Karen Reay said: 'This will be a national scandal if MPs don't step in now and modify this deeply flawed bill. What we are seeing is a potential 'smash and grab raid' on already hard-pressed taxpayers.'

Unite said that the reason that the bill has been structured in this way is that the NHS does not pay corporation tax on its activities; that private companies want public funding for providing pension provision for the staff they employ; and these firms complain that the NHS already has buildings in place, that they would have to provide.

Karen Reay said: 'The NHS is currently enjoying its highest public satisfaction levels since 1983 – the public obviously like what a state-funded universal service, free at the point of delivery, is delivering. So why are funds going to be diverted from patient services to pay for the coalition's NHS privatisation tax.'

Unite is also challenging claims made by Deputy Prime Minister, Nick Clegg that there will be no subsidy to the private sector to allow them to make a grab for NHS contracts.

Karen Reay said: 'According to our research, this is definitely not the case – private companies will be receiving substantial support from the taxpayer. Therefore, the question has to be asked: 'Is Pinocchio the latest recruit to the Liberal Democrats?'

Notes:

1. Clause 104 of the Health and Social Care bill, currently before parliament, would give the competition regulator, Monitor, the power to "specify different prices ... in relation to different descriptions of provider". [Clause 104, subsection (6), page 95, line 15]

2. The government's combined impact assessments for the Bill make clear that they anticipate Monitor using this power to set a higher price (the "tariff") for private providers than for NHS providers. Paragraph B108 proposes that "the tariff methodology" is "developed in such a way as to move towards a fairer playing field by setting different prices for different providers in order to recognise different levels of implicit subsidies". Paragraph B55 estimates that the implicit subsidies amount to 14% in favour of NHS organisations. On this basis, private providers would be paid a 14% premium tariff.

3. This has been confirmed in a legal opinion by leading public sector legal firm Hempson's.

4. Of the 14 per cent figure that the government cited, two per cent of the "implicit subsidy" is on the basis that NHS providers do not pay corporation tax, while providers do, making their costs higher. This means that the government NHS would effectively be paying back the tax that private health companies pay on their profits.

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