Offer private healthcare tax relief: calculation note

Central fiscal result

+£3.5bn - Net fiscal impact in 2027-28

Low case: +£1.0bn. High case: +£8.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Eligible private healthcare and insurance receives 20% tax relief.
• Relief applies to households and possibly employer schemes.
• No automatic NHS budget saving is assumed.
• Supply constraints are included in the uncertainty range.

Affected population

• Affected units are insured households, employers, insurers and providers.
• ABI reports rising private health claims and workplace cover.
• Higher-income households are more likely to benefit.
• NHS patients are affected only if capacity shifts.

Gross impact

• Central cost assumes £17.5bn eligible spend times 20%.
• Low case assumes narrow eligibility and some NHS offset.
• High case assumes employer schemes and price growth.
• Deadweight spending is included in the central cost.

Fiscal build-up, central case

• Tax relief on private spending: +£3.8bn
• NHS substitution savings: -£0.4bn
• Administration: +£0.1bn
• Administration and uncertainty: +£0.0bn

Central net impact: +£3.5bn in 2027-28.

Behaviour and pass-through

• Low case assumes relief induces some genuine NHS substitution.
• Central case assumes substantial deadweight subsidy.
• High case assumes premiums rise and employer schemes qualify widely.
• Private-sector staff demand may worsen NHS labour constraints.

Phasing

• 2026-27: +£0.8bn. Preparation or partial implementation.
• 2027-28: +£3.5bn. Main scenario year.
• 2028-29: +£4.0bn. Behaviour and pass-through develop.
• 2029-30: +£4.5bn. Steady-state uncertainty persists.

Main source groups

• Gruber and Lettau, "Firm demand for health insurance" (Journal of Public Economics, 2004): Employer health-insurance demand responds to tax prices and firm characteristics; supports behavioural response, but from a different health system.
• NHS Digital, "NHS Workforce Statistics, August 2025" (2025): NHS England HCHS staff numbered about 1.54 million headcount in August 2025; anchors tax-relief exposure.
• Skills for Care, "State of the adult social care workforce 2025" (2025): Adult social care in England had about 1.60 million filled posts in 2024-25; anchors care-worker exposure.
• Association of British Insurers, "Private health insurance claims and coverage" (2026): Used to size the affected population, baseline economic quantities and sectoral exposure.
• Reform UK, "Our Contract with You" (2024): Used to define the pledge wording, policy scope and implementation scenario being modelled.
• Besley, Hall and Preston, "The Demand for Private Health Insurance: Do Waiting Lists Matter?" (Journal of Public Economics, 1999): Longer NHS waiting lists were associated with higher private health insurance purchases; relevant to whether tax relief may shift demand into private cover.
• Reform UK, "Our Policies" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.