Paul Taylor did not mention the NHS once in his warning to City AM. He was talking about banking software, IPO timetables and the particular anxiety of a founder watching an incoming government weigh up capital gains tax. But the complaint he made, that Britain risks becoming a country where entrepreneurs hang on rather than sell, where regulation piles up faster than confidence, applies with equal force to a sector Whitehall has spent the past year trying to woo: health technology.

The connection is not sentimental. It is structural. The same capital gains tax proposal that has Taylor warning investors will simply refuse to sell rather than crystallise a gain at income tax rates is the one Wes Streeting has branded a wealth tax that works, and which Louise Haigh and figures close to Andy Burnham's transition operation have signalled real appetite for. Whether Burnham himself adopts it in full remains open, but the direction of travel, taxing assets closer to labour, is now the dominant strain of thinking inside the party he is about to lead. For health tech and life sciences firms, many still years from profitability and dependent on repeated funding rounds rather than steady revenue, the calculus Taylor describes is not abstract. It is the distinction between a venture capitalist supporting an NHS-facing AI triage firm or a diagnostics startup and the same investor choosing to hold onto an existing portfolio.

This is significant since the government's stated goals for the NHS presume the reverse. The £10 billion digital transformation programme, the rollout of AI triage tools, the push to get electronic patient records and federated data platforms working across trusts, all depend on a pipeline of private capital willing to build, scale and eventually list the companies that supply this technology. Ministers have talked up Britain's life sciences sector as a growth engine and signed a medicines trade arrangement with Washington partly on the promise that UK-based firms can compete internationally. None of that works if the investors funding the next generation of health tech decide, as Taylor puts it, to hang on by the fingernails rather than commit fresh capital under a tax regime that punishes the eventual sale.

There is a second, quieter version of this problem in the London listings market itself. Taylor's reluctance to commit Thought Machine to a London IPO, despite founding the company here, echoes a pattern already visible among health tech and medtech firms weighing where to go public. Stamp duty holidays and CGT tinkering have not been enough to reverse that hesitancy for fintech, and there is no reason to think a differently regulated but equally cautious sector like health technology would respond differently. If Burnham's government wants British-grown health AI and diagnostics companies to list in London rather than New York, the incentives need to be more decisive than a three year stamp duty pause, and considerably less punitive than an income-rate CGT regime would be.

None of this means the government should abandon capital gains reform altogether. There are reasonable arguments, made forcefully by Streeting's allies, that the current system undertaxes wealth relative to income. But there is a real cost to getting the design wrong, and that cost will not fall evenly. It will land hardest on exactly the high-risk, high-growth sectors, health tech among them, that ministers need functioning if the NHS's digital ambitions are to be paid for by anyone other than the Treasury.

Sir Jim Mackey's accountability agenda and the dismantling of NHS England's regional tier are premised on a leaner, more commercially literate health system, one that can strike partnerships and absorb private investment rather than simply spend allocated budgets. That premise quietly assumes investors are still willing to come. Taylor's frustration, however parochial it sounds, is a warning about exactly the conditions the NHS's reform programme now needs most.