The sooner this election is over the better. “New Labour” and “Cool Britannia” have worn thin with me and the insurance industry has borne its share of the stealth tax burden.
The government would have us believe that they've performed the seemingly impossible – lowering taxation while increasing spending on matters of public emotion such as the NHS, education, roads and more personal touches such as the recently announced “baby bonds”. For our industry, this is a “rob Peter to pay Paul” scenario.
Corporate tax rates may have dropped but industry is paying a higher price for this through duties like that on fuel, not to mention the red tape coming at us from all sides. Even simple things like renewing a data protection licence involve a multi-page form and the requirement to reapply each year.
The government has encouraged the public to take more responsibility for their financial security – this includes the provision of insurances, from medical to mortgage payment protection. However, changes to the insurance premium tax (IPT) under Labour means the government is realising greater tax revenue from these areas, but the insurer suffers the consumer backlash.
Although introduced by the Conservatives in the mid 1990s, IPT remains a little-known tax among consumers and often comes as a surprise, adding to premiums that are already rising to meet the increasing costs of claims. It only adds to the negative perception consumers already have of insurance.
As more people opt for private car ownership rather than use of a company car, they will discover that taking out warranty insurance incurs an IPT rate of 17.5%.
The public is encouraged to make private pension and medical provision but medical insurance is subject to IPT. How many private medical insurance policy holders know that they've lined the tax coffers while also reducing their potential reliance on the NHS and national insurance kitty which they still contribute to?
My cynicism leads me to expect further increases in the IPT standard rate, should Labour achieve another term in power. Under Labour, we've already experienced an increase in the general rate of IPT, from 4% to 5%. The insurance industry is a growth market and the government will have to capitalise on this in order to meet the cost of “softer” policies. It would be nice to think that this newly raised money will go towards improving our crumbling transport infrastructure but, if only 20% of what they raise from the motorist goes back into roads, it would be naive to expect any more largesse on their part.
Another huge cost to society falling on insurers is that of crime. A recent study showed we have half as many police in London as there are in New York. Not surprisingly, New York has less than half London's crime rate. Similar figures exist for other European cities.
The Conservatives also have a case to answer. Their manifesto skirts around crime reduction and is altogether silent on the issue of IPT.
They suggest that they can deliver £8bn of tax cuts and increase spending on health and education. They talk about increasing the number of police on the streets and reviewing sentencing. There seems to be a lack of coherent thought on long-term crime reduction.
Election time is probably about the only time a politician will listen to the man in the street, so if you want to get something off your chest, you've got until June 7 to do it.
