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| Pre-Budget report paints grim picture for the healthcare sector |
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Caring Times, February 2010
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A leading financial and business advice company in the care sector has been far from welcoming about the Pre-Budget Report, saying that the rise in National Insurance and VAT along with budget cuts will have a detrimental effect on the sector.
David Jewkes, a Partner at Grant Thornton, said: 'Overall, the Pre-Budget Report painted a grim picture for the healthcare sector. The announcement to raise National Insurance Contribution (NIC) rates by a further 0.5% from April 2011 on top of the 0.5% increase announced at the 2008 Pre-Budget Report was a nasty surprise. The NHS, being such a large employer, will foot a large increase to its wage bill.
'However, the �20,000 threshold will go some way to mitigating the impact as many NHS workers are employed on a part-time basis so fall below this threshold. Public sector employees will also be hit by the two year 1% cap on pay increases and the announcement that Government contributions to public sector pensions will be capped. Jewkes went on to say that the increase in VAT from 15% to 17.5% would have a significant impact upon the sector: 'Providers of private healthcare will automatically suffer an additional cost of up to 2.5% irrecoverable VAT as the vast majority of their supplies will be exempt for VAT purposes and so they will be unable to recover the VAT charged to them as input tax.
'Public heathcare providers will suffer the same additional costs where the supplies made to them are of standard rated goods or of services that are not included in the 'Contracted Out Services' provisions allowing Public Health providers to recover VAT on certain specified supplies.
'Although public sector spending is set to increase this year, following this there will be a reduction in the rate of growth of public spending. NHS hospitals were singled out as a priority for continued investment but the future looks uncertain for the rest of the healthcare sector.'
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