Government can boost economy by £2.65bn with employee health tax incentives

The CBI is today (Tuesday) publishing new analysis that shows the Government can ease labour market pressures and boost the economy by £2.65 billion over the next four years through action on tax incentives for employee health support.

Ahead of the upcoming Autumn Budget, the CBI is calling on the Government to make Employee Assistance Programmes (EAPs) fully tax-free benefits, making it easier for employers to offer mental health support to their staff. CBI analysis shows that this measure alone could boost productivity and generate £10 for the economy, for every £1 spent on the policy by the Exchequer.

Additionally, relaxing rules on tax relief for employer-funded medical treatment recommended by occupational health specialists could produce £5 for the economy, for every £1 spent on the policy by the Exchequer.

Further CBI recommendations include:

• Remove the ‘one per employee, per tax year’ limit on tax-free health screenings and medical check-ups – enabling firms in sectors like construction, agriculture and manufacturing to proactively tackle health risks that are greater compared to other industries

• Introduce a new statutory tax exemption for adult vaccinations and virus and disease testing – to prepare people in work for any potential future pandemics and new virus strains

• Make sure tax relief extends to all employee health and safety eye tests, glasses and contact lenses, whether worker or employer funded

According to the latest Government estimates, 2.8 million people in the UK are out of work due to long-term ill health. This is dragging down the UK’s economic prospects: 38% of firms have turned down growth opportunities due to labour shortages, according to a previous CBI/Pertemps report. To get more people into work, and in turn boost growth prospects, firms are looking for a change to the health tax system – with 49% of firms stating that reform would incentivise investment in the health of their people. The CBI’s recommendations outline the changes required to encourage investment in health, tackle labour shortages, and accelerate the UK’s growth journey.

CBI CEO Rain Newton-Smith said:

“A healthy economy needs a healthy workforce. We’re seeing vast numbers of people unable to work due to ill health, at a time when firms are crying out for more talent. So, there is an indisputable case for business and Government to work together to improve the health of people in work. Firms are keen to play a more proactive role in the health of their employees, but the tax system discourages it.

“Businesses tell us that the most effective measures for employee health interventions are those that are preventative. If health conditions are detected early, they can be treated more easily and at a lower cost, leading to less time off work. It’s why the CBI is calling on the Government to make Employee Assistance Programmes fully tax free, and to relax rules on tax relief for employer-funded medical treatment, alongside other CBI recommendations on employee health tax incentives. Taken together, the measures for EAPs and occupational health referrals alone could boost the economy by £2.65 billion over the next four years, putting the UK economy on a more sustainable path to growth. The upcoming Autumn Budget is a crucial opportunity for the Government to act on employee health tax incentives – and the CBI stands ready to work hand-in-hand with politicians to boost the health of our workforce.”