Chancellor Rachel Reeves is under increasing pressure to impose VAT on private healthcare, following calls from former Labour leader Lord Neil Kinnock. Speaking with The i paper, Kinnock advocated for this measure as a way to raise billions in additional funding for the NHS.
With Labour’s autumn Budget approaching and fiscal pressures mounting after recent reversals on welfare reform and winter fuel payments, Kinnock urges the government to eliminate the VAT exemption currently enjoyed by private healthcare providers. He argues that introducing VAT on private health provision could deliver essential funding for the NHS and social care, describing the removal of this exemption as both reasonable and widely supported.
The Good Growth Foundation, a think tank with close links to Labour, estimates that applying the standard 20% VAT to private acute healthcare — while excluding services provided to the NHS — could generate over £2 billion annually. A poll by the foundation in June revealed that 55% of UK adults support a windfall tax on private healthcare firms, with strong backing for more progressive taxation to fund NHS services.
This proposal follows Labour’s earlier decision to end VAT exemption on private school fees, a manifesto pledge projected to raise around £1.6 billion. Labour has vowed not to increase income tax, National Insurance, or VAT for “working people,” but extending VAT to previously exempt sectors such as private healthcare could be perceived as closing a loophole rather than breaking a promise.
Such political nuance might appeal to Reeves, who needs to address an estimated £30 billion fiscal shortfall while maintaining public service spending and avoiding backlash from middle-income voters.
Lord Kinnock contends that taxing private care would tackle growing inequality in access to treatment, as many patients are forced to pay privately due to prolonged NHS wait times. He argues that after years of underinvestment, many people resort to private healthcare not out of choice but necessity, leading to unequal access to care.
Kinnock’s VAT proposal follows his call for a wealth tax on individuals with assets over £10 million. He claims that his plan for a 2% annual levy on the ultra-wealthy could raise up to £11 billion annually and would have the support of a majority of the public.
While Labour’s election manifesto did not include such measures, there is increasing pressure from within the party and affiliated think tanks for bolder tax policies to rebuild public services. The Conservative Party has criticised both the wealth tax and the proposed VAT on private healthcare, warning that these policies could deter investment in the UK.
A senior Tory source stated that taxing those who create jobs and invest in the UK is ill-advised, particularly when economic growth is crucial, as it sends the wrong message and risks capital flight.
However, with NHS waiting lists exceeding 7.5 million and mounting pressure on health and social care, Labour is likely to face growing demands to adopt bold, revenue-generating measures in its autumn Budget.
