- AA
issues warning to drivers about further hikes to Insurance
Premium Tax
- Numbers
of illegally and uninsured drivers could soar
- AA
calls on Government to “urgently rethink” IPT policy
The AA has warned drivers to “brace for impact” ahead of the
Budget on Wednesday 8 March, when further hikes in Insurance
Premium Tax (IPT) could fall on law abiding drivers.
The AA understands that, while Fuel Duty is likely to remain
frozen for another year, a further increase in IPT could be
announced.
As well as car insurance, IPT is also applied to home insurance,
pet insurance, caravan insurance, and to roadside breakdown
services.
In November 2015 IPT was increased from 6% to 9.5% following
which it was increased to the current 10% rate on 1 October 2016.
On the 1 June 2017 IPT will jump to 12% as announced in the
Autumn Statement last November, doubling the tax within a
two-year period.
The AA believes that the Chancellor could announce another rise
in IPT to be implemented in the Autumn of 2017.
Talk of increased IPT was sparked following the recent climb down
on Business Rates. As the Government looks to find ways to make
up the shortfall, UK drivers could be lined up to fill the gap
through increased taxation.
There are already concerns that the proposals outlined by Justice
Secretary might hike premiums for young
drivers by £1,000 a year due to changes in the calculations for
personal injury payments. The Chancellor has agreed to review
these compensation payments*.
The current average quoted premium for an annual comprehensive
car policy according to the AA British Insurance Premium Index is
£633**.
Should the cost of car insurance rise, the people who will feel
the impact most are;
- Households ‘Just About
Managing’ (JAMs) who struggle to make ends meet
- Young drivers who
struggle to pay their extremely high first premiums
- Older drivers and
home owners who may find the cost just too expensive
- Inner city car and
home owners in high insurance areas such as London and the North
West. Some in these regions pay premiums twice the national
average
The AA says that more expensive insurance policies will only
encourage people to take dangerous and illegal steps to save
money, not least driving without insurance at all.
Families with young drivers have resorted to ‘fronting’ –
where the parent names themselves as the main driver on a vehicle
when in reality the main driver is their child – and more
could follow suit should IPT rise further still.
The actions of ‘fronting’ and driving uninsured mean that the
rises in IPT backfire, as when collisions happen, both the
government and insurers are asked to foot the bill.
Commenting ahead of the Budget, Edmund King, AA president says
“In June the Government will have increased IPT by 100% within a
two-year period. This is unprecedented in modern tax history.
“The danger here is that by increasing IPT, drivers, especially
young and new drivers, might be tempted to take illegal steps
such as fraudulent insurance details, or worse, forgoing
insurance altogether.
“We are already seeing this happen as there are around one
million uninsured drivers on our roads***. Further increases in
IPT will only drive this number up.
“The Government needs to urgently rethink its policy around IPT
and cut it rather than even think about increases.”
King continues “Law abiding drivers are being seen as wallets on
wheels, so while the Chancellor may be seen to be giving with a
freeze in fuel duty, he’s taking more away with increases to IPT.
“Drivers will need to brace for impact as the cost of insuring a
car will climb once again through the choices of the Chancellor.
“The Chancellor may see drivers as a means to fill the hole in
his Budget, but the only holes drivers want filling are the
potholes on our roads.”
ends
Notes to editors
* http://www.bbc.co.uk/news/business-39122756
** http://www.theaa.com/insurance/british-insurance-premium-index
*** https://www.mib.org.uk/media-centre/news/2016/september/one-million-uninsured-drivers-still-too-many/
