Streeting rules out VAT on private healthcare

At the upcoming Budget, Wes Streeting has ruled out introducing Value Added Tax (VAT) on private healthcare. This follows newspaper reports that the Treasury was considering including private healthcare services within the scope of the sales tax. When asked if this was under consideration, the health minister told BBC Breakfast, "it is not happening." This comes as Chancellor Rachel Reeves is repeatedly asked about the likelihood of tax hikes, including VAT, as she introduces her budget in November.

According to economists, taxes will have to rise in the autumn Budget if the Chancellor is to obey her self-imposed limits on borrowing to finance public services. In a Labour conference address on Monday, Reeves said the government was facing difficult choices and that she did not take risks with the public budget. The Chancellor has pledged to keep taxes, inflation, and interest rates as low as possible. However, hinting at further tax hikes, she said the government's choices had been made "harder by international events and the long-term harm to the economy."

Labour promised not to increase VAT, along with National Insurance, or the basic, higher, or additional rates of income tax in its election manifesto. According to newspaper reports, Treasury officials are considering expanding the scope of VAT to help raise more funds. If they are classified as reduced or zero-rated, VAT is levied at a standard rate of 20% on most products and services in the United Kingdom. Except for some procedures that are primarily cosmetic, the majority of private healthcare services are currently exempt from VAT. Private school tuition fees were also exempted, but the government introduced VAT on school fees in January, estimating it could raise £11.7 billion a year by 2029/30.

Reeves was asked if VAT would rise in a pre-conference address, and she replied, "The manifesto promises stand." Senior Labour ministers, including Sir Keir Starmer, have echoed these words. When asked whether she would have to raise taxes, Reeves said, "the world has changed in the last year," referring to conflicts in Europe and the Middle East, US tariffs, and the global cost of borrowing. "We're not immune to any of these things," she said.

Labour peer Neil Kinnock has asked Reeves to place VAT on private healthcare in order to raise money for the NHS. The Labour peer told the I newspaper that the VAT exemption on private healthcare would provide "critical for public services and be widely supported" by the public. The Good Growth Foundation think tank, which claims that enforcing VAT on private acute healthcare will raise more than £2 billion. Long-term government debt and weak economic growth have fuelled rumours that the Chancellor will have to raise taxes. The National Institute of Economic and Social Research, an independent think tank, predicted that the Chancellor would have to plug a £50 billion deficit in the public budget last month. However, the Chancellor played down the figure and chastised such forecasters, saying, "a lot of them are talking rubbish."