NHS hospitals demand tax cut and £1.5bn rebate

A civil war threatens to break out between large swaths of the NHS and local councils over demands from hospitals for significant tax relief and a one-off rebate totalling £1.5bn.

At issue are the business rates paid in place of council tax by commercial enterprises with premises. NHS trusts have typically paid the full amount because they are classified as "public-sector organisations rather than charities, partly because they have boards of directors rather than trustees", says The Guardian.

Now, more than half of England's acute care trusts have written to their local authority to demand they be reclassified to qualify for an 80 per cent exemption. If all of these were granted, the hospitals would pay in aggregate £250m less tax each year. They are also claiming for six years of overpayments worth £1.5bn.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Charitable sector publication Third Sector says the rebate would be equivalent to the "annual value of mandatory business rate relief received by the voluntary sector" overall.

Around half of this amount and the ongoing tax reduction would be borne by local authorities, with the remainder coming from the Department of Communities and Local Government. However, under plans announced by Chancellor George Osborne, councils will keep 100 per cent of business rates by the end of this parliament and so have to account for the whole cut.

"It is ridiculous that one part of the public sector is trying to steal money from another part," said George Owers, the executive councillor for finance and resources at Cambridge city council. It has hiked council taxes by £5 across the board this year, in part to cover the potential cost of demands for tax cuts from three trusts that would cost £12m a year.

The Local Government Association has taken legal advice and reckons it is on sound footing in refusing the applications, but Bilfinger GVA, a property consultancy representing the trusts, is equally sure it has legal backing for the claims. It is likely a test case might have to go to court, perhaps as a result of action by a council against a trust that simply refuses to pay.

For the hospitals themselves, the move comes at a time of pronounced financial difficulty across the NHS, which the BBC notes is burdened this year with a record overall deficit in excess of £2bn. Only seven hospital trusts out of 138 were in surplus, according to official figures earlier this month.

The current set up of business rates can also appear unfair when the likes of Nuffield Trust, a private healthcare provider, enjoy the charity exemption while NHS hospitals do not.

"Free healthcare for all of society is far more charitable than corporate screening for executives or plastic surgery for the rich or famous," said Paul Turner-Mitchell, a business rates campaigner