Claim on cost derived from debt agency

The government failed yesterday to justify its claim that health tourism costs British taxpayers "hundreds of millions of pounds a year" when it emerged that its evidence was an exaggeration of an unpublished submission from a debt collection agency in Gwynedd.

The claim was made by John Reid, the health secretary, during a weekend interview with the Sunday Telegraph.

According to the newspaper, "Mr Reid said there was no precise figure for the amount that the abuses were costing the NHS, but it amounted to 'hundreds of millions of pounds'. He did not dispute one estimate that puts it at £200m."

John Hutton, the health minister, for the first time named a source to substanti ate the claim during an interview yesterday on BBC Radio 4's Today programme. He said CCI Legal Services had come up with the figure, but others thought it was even higher.

It emerged later that the company is a debt recovery agency whose address is a PO box in Criccieth, Gwynedd. Its website says it is the largest contractor to the NHS for debt recovery and it is "relentless" in pursuit of money owed, operating a two-shift system from 9am to 9pm to catch debtors by telephone at work and home.

Paul Hackman, its director, was on holiday yesterday. A member of staff said he believed the company provided information to the Department of Health "some time ago".

A Department of Health spokeswoman acknowledged that the company's estimate of health tourism was not precise. It suggested the cost was "between £50m and £200m a year".

So what of Mr Hutton's other sources? He mentioned the press and the Conservative party, but nobody with direct access to official information from the NHS.

His spokeswoman said: "We are not relying on any particular figure. We have looked at a range of estimates and what we rely on is what we have heard from the NHS during and after the consultation."

Gill Morgan, chief executive of the NHS Confederation, representing health service trusts and managers, said one of the triggers for the consultation was a report during the summer by Newham primary care trust in London, suggesting it might be losing £1m on treating foreigners who did not qualify for a free service.

But after further work, the trust said the true cost was nearer £32,000 - or about a fifth of 1% of its total outlay.

Claims that the cost to the NHS as a whole was "hundreds of millions" were probably extrapolations from Newham's mistaken £1m estimate and anecdotal evidence from HIV specialists and A&E consultants in urban areas.

Dr Morgan said she had no evidence of failed asylum seekers abusing the system, but had personal experience four years ago of an American academic who took a university post in Britain and brought over a child with a complex genetic disorder who received free treatment on the NHS. The cost to the NHS trust in Devon that Dr Morgan managed was £750,000. Under the new rules, the academic would be made to foot the bill.

Dr Morgan said the confederation had no estimate of the cost of health tourism. The problem was "tiny" in parts of the country, but significant in London. However, action was worthwhile because the cost of dealing with the problem was small. Every hospital trust already has someone responsible for identifying overseas residents and asking for payment if appropriate. They will need training in procedures.

"In some places payment will have to be requested before treatment, rather than after," she said.