The forthcoming changes to salary sacrifice rules, in particular, the effect on health screening and other medical benefits, reflect a carelessly fragmented attitude towards the nation’s wellbeing and fitness. As the NHS struggles to meet the needs of an ageing, increasingly long-living but unfit population, the Treasury is withdrawing its support for a simple way to relieve at least some of the NHS’s burden.
Salary sacrifice created, in the Treasury’s view, “an uneven playing field between employers and employees who use such arrangements and benefit from the tax advantages, and those that don’t”. Choosing, wrongly in my view, to see inconsistent take-up among employers as evidence of unfairness, it has instituted a change that may instead increase unfairness, particularly for those on lower salaries for whom the unsubsidised cost of arranging insurance is often prohibitive.
While health and wellbeing-related benefits, including things such as medical screening and group income protection, will be provided as standard to higher-paid staff, they will often be offered to other staff to buy via a salary sacrifice arrangement. These are valuable but expensive benefits that, in the case of many lower-paid or just about managing workers, risk becoming luxuries that will have to be done without when the tax incentive is removed. This regressive step is bad for these employees and their families, bad for their employers and, over the longer term, bad for the social welfare of the country.
While it is feasible that some of what the Treasury will save might help meet increased NHS costs, would it not be more sensible to reduce those costs by financially incentivising tax-payers to take greater personal responsibility for their health?
Our years of austerity seem to have taught us little about the social benefits of shared responsibility and only about the short-term fiscal gains of robbing Peter to pay Paul.
Kevin Gude is director at law firm Gowling WLG