The planned increase in insurance premium tax from 10 per cent to 12 per cent next June is a cruel, nasty low blow to poorer and middle income households.
IPT was introduced in 1994 at the seemingly innocuous rate of 2.5 per cent. This was soon raised to 4 per cent in 1997 with a higher rate for insurance sold with goods and services.
But, once a tax is introduced, chancellors can rarely resist the temptation to tap it for more money.
And so it rose inexorably to 5 per cent in 1999 then 6 per cent in 2011, 9.5 per cent in 2015 and to 10 per cent this year.
In 1995 IPT raised £635m. In the 2017 to 2018 tax year, when the latest rise takes effect, the Office for Budget Responsibility estimates it will raise £5.8bn.
I suspect there is a secret agenda to align all IPT with the VAT rate.
IPT is a particularly nasty tax because it is charged on an essential, not a luxury.
If we have a car we must buy car insurance and I can understand fears that these tax rises could lead to more uninsured drivers menacing our roads.
Buildings and contents insurance, likewise, should be treated as an essential. But there will be those, especially in poorer households, who will wonder whether it is becoming a luxury they can no longer afford.
The imperative to keep tax low on essentials is recognised by the government in the form of lower tax on fuel and zero rates on most food and children’s clothes.
That approach should also apply to compulsory and essential insurance.
Compare the government’s attack on insurance with its laissez-faire attitude to betting.
When I was a youngster, betting tax was set at 9 per cent. You could choose to pay on your wager or on the winnings.
But in its love affair with gambling companies, the government has abolished this tax.
So insurers, whose business it is to protect homes and families, see their products taxed at 12 per cent while gambling companies can lure people into parting with their wages on the result of a football match knowing their product goes untaxed.
Governments frequently use tax to modify behaviour whether it be those relating to alcohol, smoking or pollution.
Yet in its attitude towards insurance and gambling, the government appears to be undermining a family necessity while promoting a social ill.
Locking the stable door
Annuity providers will finally be required to inform their customers how much they could gain from shopping around and switching provider before they buy annuity.
Financial Conduct Authority rules will come into force next September.
Forgive me for griping, but does this not feel a little like shutting the stable door after the horses have bolted, lived a fine life and been sent to the glue factory?
These rules would have been useful had they been introduced 10, 15 or even 20 years ago.
But to finally wake up to the travesty that has been imposed upon investors for decades somehow beggars belief.
Of course this rule will be useful for the few who still buy annuities.
But it is no use at all for the millions who have been forced to buy one and the many of those who have been given ghastly deals because they were unaware that a better income was to be had elsewhere.
And those who believed they might get the opportunity to extricate themselves from an appalling annuity deal had those expectations quashed after government ministers and insurance industry bigwigs contrived the stitch up at Gleneagles, which saw plans for a secondary annuity market dropped.
Yes there were dangers. But many people who were forced to buy an annuity that to them was practically worthless have now been abandoned and left without hope.
Two rules for pensions
Is it not amazing how quick ministers are to shut what they see as loopholes in other people’s pensions while consistently turning a blind eye to their own?
Hence the limit for defined contributions for those who have taken cash from their pension will in many cases drop to £4,000 from £10,000 per year.
Yet chancellor Philip Hammond has followed his predecessors in failing to do anything about MPs continuing to receive defined benefit pensions subsidised by the taxpayer.
I was once informed by a Labour minister that these were justified because MPs could have such short careers. He seemed blithely unaware that many people in the outside world are also forced to change job or career often without benefiting from a single day’s defined benefit pension.
Rule one for being a government minister: Do as I say, not as I do.
Tony Hazell writes for Daily Mail's Money Mail.
hazell@gmail.com
