Insurance tax set to increase to 6%

Young drivers could be put off getting car insurance as a result of the Budget's increase in insurance tax, Tory MPs have warned.

The jump from 5% to 6% was criticised by former minister Christopher Chope.

He said it could also result in fewer people taking out health insurance putting more pressure on the NHS.

Former Cabinet minister John Redwood also hit out at the move, which would raise £400 million a year, saying that the rise would impact already heavily taxed motorists.

Mr Chope called for Insurance Premium Tax (IPT) to be frozen for health and vehicle policies.

The standard rate is set to increase to 6% from January 4 next year as part of the Budget's package of measures to cut the deficit.

At committee stage of the Budget-enacting Finance Bill he told the Commons the measure would be "a disincentive to people to take responsibility for their own personal health care through the means of personal health insurance".

Turning to motoring, Mr Chope said young people were likely to have higher car insurance and would therefore be harder hit by the rise.

As a result Mr Chope said: "Quite often they will take a risk, going on the roads driving while uninsured."

He warned that if the increase led to more people driving uninsured then any benefit could be wiped out.

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