Chancellor Rishi Sunak has unveiled the contents of the 2021 Autumn Budget, setting out the government’s tax and spending plans for the year ahead. In his speech, the chancellor noted that this year’s budget is focused on building an “economy of higher wages, higher skills, and rising productivity” to promote recovery in the post-pandemic era.
Looking closer, Sunak’s announcements have relatively little direct impact on the insurance industry, with the lack of attention given to the insurance premium tax (IPT) welcomed by many industry players for now.
In a statement, the British Insurance Brokers’ Association (BIBA) said it welcomed “the fact that [the chancellor] is leaving the rate of the IPT untouched.”
“This is some comfort to insurance customers already facing premium increases for a variety of external reasons,” the association said. “However, tax remains a significant proportion of the cost of being responsible and we hope future spending reviews will recognise the road safety benefits of greater use of telematics-based policies by removing premium tax on these to increase their uptake.”
BIBA added that removing or reducing IPT on cyber insurance policies would help “improve uptake and broaden resilience,” given that only 6% of UK businesses have a specific cyber insurance policy in place, citing the government’s latest cyber security breaches survey.
The Association of Medical Insurers and Intermediaries (AMII) also expressed relief that Sunak did not raise the IPT rate but pledged that the group would continue to lobby for lower-rated healthcare products.
“We will continue to lobby hard that healthcare costs should be zero-rated for IPT purposes in line with other protection and general products, as they make an equally valuable contribution to the health of the nation and the UK economy,” said Dave Middleton, executive chairman of AMII.
Here is a summary of some of the key points in Sunak’s speech and what key insurance industry players are saying:
Taxation and universal credit
Sunak announced that the universal credit taper rate would be slashed from 63% to 55% no later than December 01, allowing claimants to keep more of the payment. The government would also increase work allowances in universal credit for low-income households by £500 a year.
Group Risk Development (GRiD), the industry body for the group risk sector, welcomed this development, saying this meant “not only that ‘work pays’ but also that group income protection pays for those whose employers provide a continued income in the event that they’re unable to work for a prolonged period through illness, injury, or disability.”
The government has earmarked £24 billion for housing, including £11.5 billion for up to 180,000 affordable homes, with brownfield sites targeted for development. A 4% levy will also be placed on property developers with profits over £25 million to help create a £5 billion fund to remove unsafe cladding.
“We welcome the government’s multi-year housing settlement, including its commitment to building new homes by regenerating brownfield sites across the UK,” said Claudio Gienal, chief executive officer of AXA UK and Ireland. “As we enter a new and exciting phase of building, which will include more focus on sustainability and greater use of modern methods of construction, it is imperative that the planning system and building regulations are redesigned to place safety and resilience of UK housing front and centre.”
Gienal added that failure to do so “risks repeating the mistakes of the post-war era.”
“[These include] building homes and infrastructure unfit for future generations, which must be pulled down or adapted decades later,” he said. “[Regulations] should include putting in place a legal duty for all developers to consider the insurability of buildings at all stages of the planning process.”
Public services recovery
The government plans to spend more than £8 billion for a major catch-up programme that will help the National Health Service (NHS) provide elective care that was delayed due to the pandemic. This will be supported by a £5.9 billion capital investment, allowing the NHS to tackle the backlog of non-emergency procedures and modernise digital technology.
Middleton said he was delighted to see the chancellor “injecting much-needed resources into tackling record-breaking NHS waiting lists” but admitted more could have been done to incentivise the NHS and private healthcare sector.
“The measures he has announced are unlikely to solve the unprecedented issues facing the health service and, while subsidised private health insurance would, without doubt, reduce the burden on the NHS, it is a real shame that there seems to be no appetite within government to consider this,” he said.
To reduce the likelihood and impact of flooding, the government has reaffirmed doubling
of investments in the Flood and Coastal Erosion Risk Management (FCERM) programme. The £5.2 billion investment is meant to better protect 336,000 properties across England from flooding. The government will also invest an additional £27 million to support flooding incident and emergency response activities and an additional £22 million each year for the maintenance of flood defences.
“We were delighted to see that government is committed to an additional £22 million each year for the maintenance of flood defences,” BIBA said. “We were also pleased to see that government is commissioning a new National Infrastructure Commission study, on the effective management of surface water flooding in England which will also consider the role of a range of interventions, including both traditional built infrastructure and nature-based solutions. We hope to work closely with government to help introduce more general and property specific resilience measures.”
The government plans to raise government spending on skills and training by 42%, or around £3.8 billion. Sunak also confirmed the future launch of a UK-wide numeracy programme that will help 500,000 adults improve their numeracy skills.
“We welcome the government’s commitment to skills provisions and education funding as part of levelling-up opportunities across the country,” Gienal said. “However, the government must go further and faster in identifying and solving the specific skills shortages the UK faces.
“Achieving the government’s objectives on key policy areas such as net-zero, housing, and the future of transport relies on rapidly developing a versatile workforce with the right skills. The government should create and implement comprehensive skills strategies in each of these areas to ensure there is the expert capacity necessary to deliver real progress in the years ahead.”