Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

My budget day speech has been misquoted and misconstrued. What I said about the measure was that this "will restrict the exposure of the Exchequer in relation to premiums paid for gold-plated medical insurance policies, while not affecting the majority of individuals who avail of more standard levels of medical cover". That is what I said and that is where the big tax take is. Deputy Boyd Barrett's amendment is taking the level up from €1,000 to €1,500 and from €500 to €750. The effect of that would be roughly to halve the yield from about €120 million down to about €60 million, but the maximum saving for any individual that such a change would make is €100 in one year. While many policies are affected, a lot of them are marginally affected. I heard figures being quoted in the Dáil of €800 to €1,000 and €1,000 to €1,200, and different premiums were quoted, but the relief is at the standard rate of tax, which is 20%. Therefore, if somebody's premium goes from €1,000 to €1,200 for one adult, then that is one fifth of €200, which is €40.

The big imposition occurs only on the very high level of premium, and that is the point I was making on budget day. If I was making the speech again, I would have made it clearer. The justification of my decision is as follows. About 45% of citizens have medical insurance, and the tax relief on medical insurance has risen year after year over the past four years, worth up to €500 million. All taxpayers, of which 55% do not get any benefit from this, contribute €500 million so that 45% have access to private beds and private care in hospitals. On equity grounds, that is not fair.

The industry does not seem to be making any attempt to control costs. Over the past four years, the cost of medical insurance has gone up by 86%. Any consumer price index, even the medical consumer index, has not gone up by 86%. That is an astronomical increase over four years, and the taxpayer is tied to the wagon because, as it goes up, we must contribute more. I cannot justify, in very difficult times for taxpayers, continuing to allow the health insurance industry to dictate the amount of tax that is transferred from the generality of taxpayers to benefit those who have private health insurance. That must be restricted.

This is not just a hunch of my own. The Commission on Taxation recommended this as well. In 2009, the commission, in its recommendations, acknowledged that medical insurance is expensive and that medical insurance reliefs play a role in attracting and retaining individuals within the medical insurance system. It went on to state there is a sizeable dead weight element as many individuals would pay these premiums in the absence of income tax relief. In addition, the commission acknowledged that without medical insurance, it would be necessary for the State to provide treatment to more individuals through the public health system. On that basis, the commission recommended that the relief from medical insurance should be continued, but on a more limited basis. I followed the commission's advice, which is what I have done here. If we take a premium of €3,000 per adult and people are insuring for private hospitals and are paying €6,000, then 20% of that is a sizeable amount of money. For the generality of policies, which give people reasonably good cover, while there is a loss in the amount of extra income tax they will have to pay, it is marginal for many people. On the grounds of equity and on the grounds of tax management, this is a good proposal. I would be one of the last people to be accused of being motivated by left wing sentiment, but on the grounds of equity, this is fair. I do not think people who will never be able to afford medical insurance should have a portion of their taxes used to provide very big relief to people on high premium insurance. I do not think that is fair.

The purchase of medical insurance is very inelastic, to use the economic term. Even though the premiums have gone up by 86% over four years, the number insured has gone down by much less than one would expect. Anecdotal evidence suggests that the people who are dropping out of medical insurance are people who have lost their jobs rather than people who are not paying any more because it is getting more expensive. In the interests of the taxpayer, that relief needs to be limited. I do not think there will be a big fall off for this reason. It is inelastic. The consumer price index shows the cost of medical insurance increased by 86% between December 2008 and June 2012. Health Insurance Authority figures show that the number of individuals covered by private medical insurance fell from 2.297 million to 2.13 million over the same period. That is a reduction of 174,000 people, or 7.5%. Following an 86% increase in the cost of health insurance, the numbers availing of health insurance reduced by 7.5%. Again I would challenge the predictions that this measure will drive a lot of people out of health insurance. The evidence does not suggest that at all. I am not going to wear a situation where the medical insurance industry can expect the taxpayer to pay €500 million per annum while they do not make an attempt to control costs. I think the increases in medical insurance in recent years have been outrageous and the industry should control costs. Looking at the progression of the tax contribution over the past four years, if we had not made change, by 2020 the taxpayer would be contributing €1 billion to subsidise health insurance. I cannot justify that. I cannot stand over that.