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

The consumer price index shows the cost of medical insurance and it increased by 86% in the past four years. There seems to be no control of costs in private medical insurance and much of the time it is a transfer from the consumer, who pays the premium, to the company which transfers it on to settle the bills of consultants and private hospitals. By capping it at €1,000 per adult and €500 per child, those on the lower cost policies are fully protected in respect of their tax credit and those above that point lose 20% of the tax credit because the tax credit is not at the marginal rate of tax but at the standard rate of tax, which is 20%. If a single person has a premium of €1,200, the cost of the measure to them is one fifth of €200. If it is capped at €1,000, so it is €200 at the standard rate of tax, which is €40.

The point I am making is that the real exposure of the Exchequer is from the gold plated policies. If I was explaining it again, I would not have used that expression because it gave ammunition to my opponents but it happens to be true that the exposure is from the very expensive policies. Of course, they will pay more. I have been advised by members of all parties that budgets should be progressive and that those who can afford to pay should be the people who have the impositions placed on them. Let us examine the measure on the grounds of progressivity or regressivity. Only 44% of taxpayers have private health insurance, so the proposition not to do this is that 56% of taxpayers should subsidise 44% of them. That is not progressive. When one puts into the mix the fact the cap is at €1,000 and that anybody who has insurance of less than €1,000 per adult and €500 per child is not affected at all by this measure, one can see that it is a progressive and a targeted measure.

It is the second most expensive tax credit in the tax code. In 2013, the taxpayer will subsidise personal medical insurance to the tune of €0.5 billion and Revenue has estimated that if we allow it proceed as it is proceeding, the subsidy will rise to €1 billion in 2020. I cannot justify that when people on very low incomes who buy a few household goods or a packet of cigarettes or have a pint are effectively subsidising the higher income people who have costly medical insurance policies to that extent.

I believe private insurance is a good thing. I am an advocate of private health insurance but somebody had better do something about the costs. It rests with the companies in the first instance. I cannot see why the extravagant bills being presented to the insurers are always honoured, much of the time without them being checked. I ask the medical insurers to control their costs because astronomical amounts of money are being paid and much of the time for limited enough medical interventions. That is the argument I would put forward.

If the Senator requires additional information, he can see how it progresses. The credit cost €404 million in 2011, €448 million in 2012, €500 million in 2013 and it is projected to cost €1 billion in 2020. The credit is not being removed; it is simply being capped. The Senators can do the sums themselves. If somebody is paying €1,500, he or she will pay an extra €100. He or she will get the credit up to €1,000 and then it is one fifth of the balance above that. I know some people who have very high cost medical insurance will pay a lot. If one is paying €3,000, it is capped at €1,000, so it is one fifth of €2,000, which is a good bit of money. It is an extra €400. I would assume that if one was paying €3,000 for one's medical insurance, one could afford it. I do not see why there should be a transfer of resources from people who are relying totally on public health, which is 56% of the population, to the top tranche of the 44% who are availing of medical insurance. Those are the arguments.

There is a context also. We had a very difficult budget where a lot of tax had to be raised. It is a series of bad choices. One would like to be in a position where one did not have to raise taxes, and I hope we will get back to that before too long. In terms of raising taxes, we have to be fair and put the burden on the people who can best bear it and eliminate tax credits which are no longer necessary. One could object to any one of them but when one lines them up against the other choices available to raise the same amount of money, one would return to these kinds of choices. At least it is a progressive measure. I thank those who have supported this measure and I commend it again to the House.