Press Room
Pre-budget report paints grim picture for the healthcare
sector
If you are writing on the impact of today's Pre-Budget Report
announcements on the healthcare sector, please consider the
comments of David Jewkes, Partner at Grant Thornton.
"Overall, today's 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.
"The increase in the rate of VAT from 15% to 17.5% from 1
January 2010 will 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. Organisations should consider
paying suppliers in advance of the 31 December 2009 deadline where
possible to mitigate some of the extra VAT cost.
"Although public sector spending is set to increase next 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."
For further information, please contact:
Lisa Ritchie, Grant Thornton press office, 020 7728 2208 or via
email on lisa.ritchie@gtuk.com