Finance Bill — House of Commons, 2015-09-08
Topic: Domestic Commerce
Barbara Mary Keeley (Labour, Centre-left): No I will not. As I have just stated, the president of the AA, Edmund King, has said of the Budget: "The sting is in the tail." It is fine to make improvements that help the motorist, but the sting is in the tail and he has made the point that this is an outrageous hike. I ask the hon. Gentleman to reflect on the impact on young motorists and the possible increase in the number of uninsured drivers. If that were the result of this hike, it would be a very dangerous development The chief executive officer of the British Insurance Brokers Association, Steve White, has also raised concerns about the impact of the tax on insurance policies and on the industry. He makes this important point: "Those hit by this stealth tax will include the 20.1 million households with contents insurance, 19.6 million with motor insurance and 17 million with buildings insurance. The Government has been working with the industry to reduce the cost of insurance for consumers…It therefore seems counterintuitive to be taking measures which will add to the cost—effectively taxing protection." Let us be clear about what is going on. This is a tax on the protection that families need The Financial Secretary to the Treasury, who is now in his place, has made clear in the past his views on the impact of increases to this tax. In 2010, he said of the smaller rise that was introduced at the time: "I am not denying that we expect the increase to be passed on predominantly to consumers; we expect that the bulk of it will be."—[Official Report, 15 July 2010; Vol. 513, c. 1130.] Indeed, some of the UK’s biggest insurers, including Aviva and RSA, have already confirmed that they are planning to pass on the cost to consumers We need to be clearer about which groups will be affected by this increase and what impact it will have. Car insurance and home contents insurance policies will clearly be affected. Of course we welcome the assurances that the Government have given about preventing a rise in VAT, income tax and national insurance, but families in the UK will still be hit by these changes to the insurance premium tax. This tax increase on families comes in addition to other Budget measures that will hit families, such as cuts to tax credits. We must always keep in mind the cumulative impact on families of all the Government’s policies Hon. Members have asked what else we would do. The tax rise is also contrary to what the Chancellor promised before the election. He said that "tax increases are not required to achieve"— further consolidation, and that this "can be achieved with spending reductions" So the Chancellor did not foresee these measures. Despite his claim, however, he has chosen to deliver a Budget that increases taxes as well as placing a significant squeeze on public finances and services. The average household is likely to be affected by these changes in multiple ways. Many families purchase more than one type of insurance, which means that they will have to pay this tax increase more than once We must also consider the effect of the policy on different groups. People’s insurance needs differ depending on their age and income and on whether they own their home. Those who have high premiums are more likely to be adversely affected by this increase to the taxation rate. The groups that I single out are young motorists, homeowners and some businesses. For example, insurers have estimated that the average cost of a year’s cover for drivers under 25 will jump by around £50. The British Insurance Brokers Association has stated that "a young driver or an experienced driver in an inner city area would see the amount of tax on an annual car insurance premium of £1,500 increase from £90 to £142.50" Young motorists already pay the highest premiums, with the average policy for someone who is under 25 already costing more than £1,200 a year. For a young apprentice, jobseeker or student, the increase could make the difference between being able to afford insurance so that they can travel to work for their first job and not being able to do so. Young people are already having their eligibility removed for housing benefit, jobseeker’s allowance and the new minimum wage, and this is just another financial burden that the Government are placing on them Another group facing higher insurance premiums are people who have become unemployed. A BBC report in 2012 showed that those without a job are generally asked to pay more for motor insurance cover than those in full-time employment. BBC research with three different brokers found that car insurance premiums averaged almost a third more—30%—for those out of work, but that the cost could be as much as 63% higher. People who are out of work already face many challenges: looking for a job; finding the money to pay their rent or mortgage; and finding the money to feed their families and run their homes. Insurance premiums are higher than regular premiums, so this increase is just another blow to people who are struggling to find work.