Campaigners against insurance premium tax (IPT) fear the levy is set to rise to 12.5% whatever the

outcome of the general election today (May 7).

The Labour party's manifesto excludes any specific mention of IPT, but Chancellor Gordon Brown raised the tax twice during his party's first term in office (1997 to 2001). The tax was originally introduced by former Conservative Chancellor Norman Lamont in 1994.

Brown increased the standard rate of IPT from 2.5% to 4% in April 1997 and introduced a higher rate for certain types of travel and motor insurance of 17.5%.

He raised the standard rate again in July 1999 to its current rate of 5%.

A spokeswoman for the Labour party said its manifesto commitments on tax were limited to not raising income tax or extending VAT to zero-rated items.

She said: “There are more than 240 taxes and the Labour manifesto does not refer specifically to IPT.”

Philip Allott, project director of the National Campaign Against Insurance Premium Tax (NCAIPT), branded IPT a “stealth tax” and said he warned that it could rise further.

On the NCAIPT's website, Allott said he was determined “that the rumours, which are rife and growing, of a hike to 12.5%, will stay just that – rumours.”

The NCAIPT has carried its campaign to the parliamentary candidates of all three main parties and claims to have received support from Conservative leader William Hague and London Mayor Ken Livingstone.

Both Conservative and Labour Chancellors have found IPT to be a useful source of revenue.

In 1999 to 2000, IPT raised around £1.4bn on total premiums of £29bn.

A spokesman for the Association of British Insurers said it was opposed to IPT. He said: “We believe it penalises peoples' responsible behaviour and we would like IPT to be abolished.”