Gordon Brown walks back into Number 11 today carrying with him a manifesto pledge not to increase income tax levels.
However, the canny Scot has steadfastly refused to comment on the 250 other taxes he has to fiddle about with. Step forward insurance premium tax (IPT)?
The Economist recently named IPT as one of Brown's first targets for his coffers, particularly because it is ideal for stealth.
There are arguments to raise IPT across the board to 17.5%, where it is already levied for business travel, and equate it to the level of VAT. But until this is done, Brown has room to steadily increase the IPT rate to the detriment of insurers and policyholders alike.
The Association of British Insurers estimates that the industry loses out on about £2bn each year because it is exempt from VAT, leaving it unable to claim back on incurred expenses. Meanwhile, IPT raises about £1.75bn for the Treasury.
While this continues, Brown can conceivably raise IPT levels closer to 17.5%, but without losing the sums that insurers effectively lose through the VAT exemption.
There are winners and losers in the UK insurance industry under current IPT rates. But the industry will lose out as whole if NCAIPT predictions come true (see page 3).
If UK insurers want to stop being a soft target, they should lobby for IPT to be scrapped altogether and replaced by VAT.