Jeff Prestridge  

Get in the spirit Mr Hammond

Jeff Prestridge

Jeff Prestridge

One tax that Mr Hammond would be wise not to increase is insurance premium tax which applies to the premiums we pay for insuring our homes, cars, pets and paying our private medical bills. Premiums which are already rising steeply.

For once I side with the insurance industry on this issue. In the run up to the Budget, the Association of British Insurers has put together a video calling for the tax not to increase beyond the current 12 per cent.

The video is available to view on YouTube and it is well worth a watch.  It shows an individual dressed in yellow fining people for doing the right thing – stopping to let a pedestrian step onto a zebra crossing, locking their front door at home and picking up what their pet dog has deposited in the local park. It is the best thing the Association has produced in many a year. Maybe it could now do something to address the issue of loyal insurance customers being offered more expensive cover than new customers (indeed they could make a video about it).

Insurance premium tax is a harsh tax because it impacts on all of our lives – it is sometimes inescapable unless we break the law (driving without insurance). It also hits the poorest and the young the hardest.

According to think tank the Social Market Foundation, households will pay on average £200 next year in insurance premium tax. In the process, the government will collect more revenue than it does for a number of so called sin taxes – beer and cider duties, wine duties and spirits duties.

If Mr Hammond were to increase the tax to 15 per cent (as some commentators believe he could well do) it would be a grave mistake. Indeed, as the Institute For Fiscal Studies argues, the case for cutting the tax is a stronger one.

So Mr Hammond. Do not increase insurance premium tax again. Leave it alone and let us enter the Christmas season in the best of spirits. Please do not ruin our Christmas.

Jeff Prestridge is personal finance editor of the Mail on Sunday