Under plans to combat a recent surge in long-term illness, workers and employers will receive tax breaks worth tens or even hundreds of millions of pounds for health checkups and treatments to ensure that employees are healthy enough to perform their job.
Treasury is considering proposals that would allow employees and bosses to receive tests, screenings and preventive health care without having to pay taxes on them.
Employers may also be able reduce their tax bill overall by investing more in so-called occupational healthcare services, which are designed to prevent ill health from driving employees out of their job.
As ministers grow increasingly concerned with the rising costs of sickness, they are considering laws that would force companies to provide occupational health services.
The number of people with long-term illness has increased by 400,000 in the last decade. This means that welfare costs have risen by billions of pounds, while employers are struggling to fill vacancies.
Mel Stride, work and pensions minister, said that reducing the figure was a “top government priority”. He argued that this could free up money for tax reductions and help reduce inflation, as well as helping to grow the economy.
Previous schemes focused on returning the long-term ill to work. However, ministers now focus on how to prevent people from leaving their jobs due to illness. Stride recently said that “hundreds and thousands of people leave work every year” due to illness, and that “we have to choke off that flow”.
Fewer than half of all employers provide any occupational health service to keep their employees fit for work. This is less than one fifth of small business. Ministers plan to improve advice and create common service standards in order to encourage more businesses to provide services like physiotherapy and ergonomic workplace assessments.
Stride and Jeremy Hunt (the chancellor) are now consulting on tax incentives and laws in order to encourage more generous health benefits for staff.
Hunt stated that it was important to maintain workforce participation to ensure we have enough workers for the future needs in the UK and to maximise productivity growth. He also argued that the tax system should be used to encourage employers to provide more occupational health services as a way to reduce labour market inactivity.
Employees are usually required to pay income tax based on the value offered by their employer, who is also responsible for paying national insurance contributions. These taxes are currently only exempt for limited services, such as treatment that helps people return to work after being off for a whole month. The maximum amount of exemption is £500. The government is formally considering removing the £500 limit and allowing employees and employers to claim tax relief on a wider variety of treatments designed to keep workers in employment.
This could include flu shots, general medical checks-ups, health screenings, and any other treatments “that aim to reduce absence from work or allow employees to perform better including preventative treatment”. These would not include private health insurance or wellness treatments such as gyms and spas.
Treasury believes the schemes would cost in the “tens of millions”, but that they will benefit the economy because more people will be employed. The Treasury is also looking at a “super-deduction scheme” that would allow companies to claim back any expenditure on occupational health against their tax. This could cost much more.
The final package depends on the economic conditions that Hunt will face at his autumn statement. Treasury has stressed it “is not committing to any specific tax incentive at this time”.
Steve Barclay said, “High-quality workplace occupational health support would not only reduce economic inactivity but could lead to a happier, healthier workforce.” By focusing on prevention, we can help reduce the burden of the NHS by reducing waiting lists and reduce individual health benefits.
Last week, the Office for Budget Responsibility (OBR) highlighted the cost of increasing ill health. The OBR estimated that an increase in long-term sickness since Covid has increased borrowing to almost £16 billion via extra benefit payments of £6.8billion and lost tax revenues of £8.9billion.
It is believed that this is due to a worsening of public health. A particular deterioration has been seen in mental health. This has resulted in a doubled number of new sickness benefits since 2019. Stride stated last month that the social media, as well as the physical and psychological tolls of the pandemic or homeworking could all be contributing factors.