Tax hike ‘attack’ on motorists already hit by rising premiums

Nearly nine in 10 motorists believe the increase in insurance premium tax (IPT) from six per cent to 9.5 per cent, announced by Chancellor George Osborne in the recent Budget, is “unfair” and will encourage uninsured driving, a survey by the AA of nearly 30,000 drivers found.

The planned tax hike will push up the cost of insurance polices from November, and former Bradford East MP, David Ward, who has long campaigned for fairer premiums, said he was disappointed that lessons had not been learned from the previous government.

After a Downing Street summit with representatives of the insurance industry in 2012, Prime Minister David Cameron vowed government action to tackle the compensation culture, reduce legal costs and cut health and safety red tape which would see car insurance savings for motorists.

“It’s a direct attack on car drivers,” said Mr Ward, who had seen premiums fall by 27 per cent in Bradford between 2012-2014.

“Car insurance is not voluntary therefore it is a direct tax directed at car drivers who are struggling enough as it is, and it is sad that they have not learned the lessons from the previous government. This is a serious issue and another kick in the teeth for car drivers.”

The AA reported the first significant quarterly increase in premiums since winter 2011 recently, which has taken the average annual comprehensive car insurance premium to around £549.46. The AA estimates that the tax hike will add an extra £18 to the cost of a typical policy, and said it was informing the Treasury about its new research.

Janet Connor, managing director of AA Insurance, said: “Over the three months ending June 30, the average ‘shoparound’ quote for a comprehensive car insurance policy rose by 5.2 per cent, an extremely sharp jump.

“That premiums have been falling seems to be the Chancellor’s justification for the tax increase but he is wrong. His timing couldn’t have been worse; not only are premiums starting to rise but the tax can only lead to even greater premium increases than could otherwise be expected over coming months.”

Ms Connor continued: “There is no justification for this underhand and unfair tax increase. We strongly urge the Chancellor to reconsider. I hope he doesn’t just take note of our findings but acts on them.”

The AA’s research showed that 29 per cent of people were unaware that IPT applied to home and motor insurance, and 72 per cent were unaware that it also applied to roadside breakdown cover.

Graeme Trudgill, executive director of the British Insurance Brokers’ Association, said margins in the insurance industry are “tighter than they have ever been”, and the tax hike will result in higher premiums for the public, including the 20.1 million households with contents insurance, 19.6m with motor insurance and 17m with buildings insurance.

He added: “Young drivers are the most over-represented age group for uninsured driving and increasing the cost of their motor insurance further is likely to increase the level of uninsured driving, which we are aware has now started to deteriorate.

“The increase completely undermines the constructive work that the industry and government have done in the past few years to tackle fraud.”