Let’s focus on the costs we can control and ease the squeeze on British households
IPT rises could add to rising household bills
Meryvn Skeet
| Association of British Insurers
Working families and public services are facing additional economic pressure but fighting an increase in Insurance Premium Tax (IPT) can help lift the burden.
Ordinary working families are seeing their budgets severely squeezed. Energy costs are rocketing, fuel on the forecourt (if available) has risen in price and many of the items in our supermarkets are more expensive.
Add to this, we have the cost of helping the NHS and our social services recover and play catch up, post-Covid. This is an expense borne by working people through the National Insurance increases.
Regardless of the root cause of these issues – and some were unforeseeable or perhaps unavoidable – we need to understand that household budgets can only be pushed so far. Any steps taken in this month’s Autumn Budget should bear this in mind.
If further taxation is required, we should recognise who ultimately foots the bill. And, when it comes to Insurance Premium Tax (IPT), the cost lands firmly with responsible consumers who are simply trying to protect their possessions, future and family. Worse still, this tax hits struggling households hardest, with the poorest families spending a far greater proportion of their income on insurance than the richest (Social Market Foundation).
We need to understand that household budgets can only be pushed so far.
There’s also a false economy in making insurance more expensive, if the NHS is a priority. This is because as IPT rises, more people walk away from paying for private healthcare, increasing the burden on the health service. The Centre for Economics & Business Research has estimated that 200,000 formerly-private healthcare customers have been pushed back to the NHS because of previous IPT rises. Furthermore, every subsequent 1% rise will push 31,500 more people back to public provision, which costs the taxpayer significantly.
And finally, IPT impacts companies that buy insurance too. That’s more money out of the pockets of businesses during a key period when they are being pushed to pay higher wages, grow and hire more staff as the economy recovers.
The Chancellor has a lot of difficult decisions to make. But at a time when ordinary working households and small businesses are under such financial stress, he should freeze IPT to ease the squeeze.
Mervyn Skeet is ABI Assistant Director, Head of Taxation
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