Mr Osborne sought to justify the increase by arguing that the cost of premiums had fallen for many families, and that Britain’s insurance premium tax was well below that of other countries – Germany, for example, levies 19%.
The Chancellor said that the move would affect only one-fifth of all premiums, but the British Insurance Brokers Association slammed the move as a “stealth tax” on insurance policies that would hit millions of ordinary households.
“The Government has been working with the industry to reduce the cost of insurance for consumers – including a summit chaired by the Prime Minister. It therefore seems counter-intuitive to be taking measures which will add to the cost – effectively taxing protection,” said Steve White, BIBA chief executive.
Businesses will be hit alongside consumers, as the hike will apply equally to corporate insurance premiums. This won’t to be a popular measure, but it is the first really significant increase in the standard rate of IPT since it was introduced in 1996.