Against the backdrop of the Covid-19 Pandemic UK Chancellor Rishi Sunak delivered his first budget and the fears of the insurance sector were mostly unfounded as the rise in Insurance Premium tax (IPT) failed to materialise.
In the wake of the serious flooding in the first three months of the year the government also pledged to increase spending in flood defences.
Huw Evans, (pic) Director General, at the Association of British Insurers said: “Millions of insurance customers who do the right thing and take out insurance will be pleased to see that the rate of IPT has not been raised in this Budget.”
However, he added he believed the budget should have gone further.
“The Government should consider reducing IPT, as it is a regressive tax that hits the poorest households hardest,” added Mr Evans
British Insurance Brokers’ Association (BIBA) CEO, Steve White, said while the news on IPT was welcome the Chancellor had left the door open for future increases.
“We welcome new Chancellor, Rishi Sunak’s approach to IPT,” he said. “Not changing the current rate, already at a significant 12 pence in the pound of every premium paid will help businesses and consumers to afford the insurance protection they need We will, however, bear in mind that the Chancellor has not explicitly frozen the rate and we will continue to campaign for Government to freeze, if not reduce, the rate of IPT for the remainder of this Parliament.
“We will also continue to highlight to the highest levels of Government the dire consequences of a tax that potentially reduces access to insurance. In our 2020 Manifesto, Access, BIBA highlighted research by Zurich that shows a correlation between steady increases in IPT and a decline in the uptake of insurance. Because of this, as well as freezing the rate we believe targeted tax relief on both cyber insurance and telematics-based motor insurance would alleviate this trend.”
On flood defence spending Simon Welton, Market Head P&C, UK & Ireland, at Swiss Re, welcomed the Budget announcement of a doubling in flood defence investment to £5.2 billion over the next six years, as well over £300m immediately to help communities affected by flooding in the recent storms.
“The extra investment in the country’s flood defences will be a much needed boost to homes and businesses impacted by the recent storms, the damage from which is still clear to see in many parts of the UK,” he added. “However, it will still take time for this money to translate into actual schemes to protect or alleviate the risk of flood. This investment should be part of a concerted and coordinated effort by the government, insurers and the wider business community to build more resilience into our infrastructure and help mitigate the growing danger of climate change on our lives.”
Mr Evans added: “We welcome this much-needed extra investment in Britain’s flood defences. The investment of £5.2billion over the next six years will come as some relief to those communities across the country at flood risk who live with the distress and disruption that flooding causes. However, this still falls short of what the ABI has said is needed, £1.2 billion a year, to meet the growing risk of climate change. We look forward to seeing further details on this announcement.”
Stephen Fuller, Partner at Mazars said: “The government has proved that it is receptive to genuine concerns posed by the financial services sector. It has responded to industry representations warning against the potential impact of the Digital Services Tax on the financial services sector in the UK. It has indicated that there is an exemption for financial services online marketplaces. This will exempt all financial services business from incurring additional costs in complying with this tax- the UK is a market leader in the financial services sector and the government is acting to preserve this post-Brexit.”