Finance Bill — House of Commons, 2015-09-08
Topic: Domestic Commerce
Barbara Mary Keeley (Labour, Centre-left): I think that I have already covered that. In a debate in 2010 it was accepted that these costs are almost always passed on. Almost every commentator has said that the costs will be passed on. Aviva and RSA have already announced that they will pass them on, so all the signs are that they will be passed on. Clearly, it would be good if any part of the insurance industry decided not to pass on the costs, but what we are seeing is an increase in premiums across the piece. This tax increase on a merit good like insurance could undermine the message that individuals and society benefit if the correct level of insurance is taken out. An increase in the insurance premium tax of 58% punishes families and individuals for acting responsibly. When there have been previous increases in the tax, they have been something in the order of around 1%. There is a major concern that this steeper increase could be large enough to alter the coverage chosen by customers, which means that they would become underinsured. It may be that Conservative Members do not face problems of underinsurance in their constituencies. I must say that I have seen a lot of it in my constituency. People really suffer when they are underinsured. If levels of crime are high and there are other issues affecting them on the roads, underinsurance is a real issue The Government need to ensure that tax policies do not lead to a situation in which families struggling on low incomes decide to forgo insurance or let their previous policies lapse because prices have risen and they decide that they can no longer afford insurance. That could leave many families at risk of great loss in the event of burglary, or if they have a road accident Underinsurance could be a consequence of this rate rise. People could also opt for cheaper policies, which means that they do not get the right coverage, or they opt for higher excesses, which effectively means that their coverage is less. Buying insurance can be a complicated business and a good price may often take precedence over having the right level of coverage The HMRC policy paper for this rate rise estimated that there would be "a small reduction in the demand for standard-rated insurance." Any fall in demand for insurance that leaves families open to greater risks should be avoided. Where does the Minister believe this "small reduction" is likely to occur and what is she doing to prevent reductions in the demand for insurance Finally, HMRC suggests that there could be changes in the behaviour of insurance companies. It states that there is likely to be "a small increase in tax planning activity by insurance companies." What are the Government doing to minimise this further potential unwanted consequence Clause 43 is a typical measure from a Conservative Government who promise one thing and then deliver the opposite. In this case, the Chancellor promised before the election that he had no need to raise taxes, but then he raised this tax, which will have an impact on households throughout the UK and on their usage of insurance. The increase could have a number of negative consequences. Higher insurance premiums may lead to fewer families and individuals purchasing much-needed insurance to protect themselves against everyday problems, which happen much more often in some parts of the country than in others. I am talking about burglary and damage to property and possessions The Government must provide more information and analysis of the wider impacts of this tax increase, as well as strategies to prevent the negative consequences that are likely to result from this policy. Labour’s amendment to clause 43 asks the Government to consider the impact of any future increase of the tax. The Institute for Fiscal Studies has called for a road map to indicate a long-term strategy for our tax system. The CBI has outlined its concerns about the UK tax system in a letter to the Financial Secretary, stressing the need for Ministers to recognise that "changes to the tax system that appear innocuous can have wide-ranging effects." The CBI also stated that there was a need for "renewed discipline" in tax policy making and that the lack of consultation and notice period for tax changes can cause great uncertainty for businesses. None the less, the Government continue to increase and lower taxes for short-term policy goals. Labour believes that we need to consider how to reform our tax system so that people and businesses are taxed efficiently and fairly As I have outlined, there are particular concerns about this and any future potential rise in insurance premium tax because of the impact it might have on the price of insurance policies and the take-up of insurance by families and individuals. With that in mind, will the Minister comment on the potential for any further increases in the insurance premium tax during this Parliament, given the comment of her colleague in the Lords that the tax is an easy target Labour’s amendment will ensure that the impact of any future increase is properly considered by the Government. It will ensure that there are careful deliberations—much more careful than we have seen on this occasion—on the short and long-term consequences of any further increase in the insurance premium tax and its effect on families and business. I ask Members on both sides of the Committee to support our amendment tonight.