Tax, spend and legislation

From IPT, to PMI, floods and more…

Tax, spend and legislation


By Graeme Trudgill

Ahead of the Chancellor’s Budget on March 15 we focused on a few priorities from inside and outside our Manifesto, which relate to tax, spending and any potential legislation arising from it that impact our sector.

In our Budget submissions our asks were connected to protecting businesses and allowing them to grow; protecting consumers with better health outcomes; protecting homes and businesses against the risk of increased flooding; and enabling more opportunities for education and skills.

Insurance Premium Tax

The insurance sector provides financial resilience, which surely any government would see as a responsible and desirable thing. We recognise that the economic challenges faced by the UK currently do not allow for a general cut in IPT. However, we would like to see a commitment for the rate of IPT to be frozen for the remainder of the current parliamentary term. Government receipts from IPT are up 9% (£432 million) according to Government’s provisional figures for 22-23 April to December, compared to the same period in the previous financial year, so there is no justification for an increase.

As a lever to encourage the increased investment by businesses that is essential for their growth and to help build resilience across the UK economy, we are urging the Government to consider targeted relief from IPT to encourage businesses to purchase protection against emerging risks such as cyber. In the UK, 95% of businesses, particularly SMEs, do not have a standalone cyber policy in place, and only 43% have some cyber cover as part of a wider policy* (*DCMS Cyber Breaches Survey)

We also believe IPT relief should be granted to those who have seen the cost of their buildings insurance for impaired high-rise cladded buildings awaiting or undergoing remediation. The higher premiums such risks attract provide a ‘windfall’ in IPT receipts for the Government that exacerbates the impact of insurance costs on consumers that could be eased by Government action. 

Private medical insurance

The pandemic (among other things) has put enormous strain on the NHS with the backlog of patients needing routine treatment at an all-time high. We have proposed that some of this burden is transferred to the private sector by giving employers and employees a financial incentive to buy private medical insurance. Research demonstrates that small businesses that invest in their employees’ health and wellbeing or that arrange health insurances for their workforce can significantly improve productivity, while concurrently reducing pressure on the NHS. Expressed another way, an estimated 141.4 million* working days were lost in 2018 because of sickness or injury, with the biggest causes being minor illnesses, musculoskeletal problems and mental ill-health.(*ONS Sickness absence in the UK Labour Market 2018).

However, employer-provided health insurance creates a taxable benefit for employees. For those on lower incomes that may create a cost barrier and discourage take up. For SMEs wishing to offer their employees the cover, the cost of P11D administration and increased National Insurance liability in respect of the benefit can also be an obstacle. If the first £500 of health insurance benefit could be waived from the P11D, a significant increase in SME provision of private medical insurance is likely.

We believe this is a win-win strategy – helping with employee productivity and wellness, increasing Government’s IPT revenues and relieving some of the excessive demands on the NHS.

Flood protection

The availability of suitable and affordable flood insurance is important for the financial resilience of households and businesses. As the impacts of climate change and building developments increase the potential for flood events, it is vital that Government maintains its commitment to flood defence investment and for flood mitigation measures to support the UK’s financial resilience.

The National Infrastructure Commission’s (NIC) report on the risk of surface water flooding, published in November, estimates that currently 325,000 homes and businesses in England are in areas at highest risk of flood. We call for:

  • Government and devolved administrations to take forward actions in the report by the NIC on effective management of surface water in planning. In addition, they should make available more granular surface water flood mapping information.
  • For Government to ensure property planning guidance and building regulations that ensure sustainable home building are followed.
  • For Flood Re to be allowed to discount insurance premiums where recognised flood resilience measures are installed.

Apprenticeship Levy Reform

A change could help our sector develop the talent pipeline and address skills challenges. Insurance broking is a sector that has a significant proportion of highly skilled roles where job holders need commercial acumen and analytical capability.

We would like to see:

  • Expansion of the apprenticeship levy to a wider skills development levy that would provide support for all workplace skills and training – both in and outside a formal apprenticeship framework.
  • The 12-month minimum duration under the existing Levy rules to be removed so that more development opportunities could be offered.
  • Greater flexibility around the rules could help brokers to encourage workers who have retired early to re-join the industry, and tackling the employment gaps that exist in our sector through an increased uptake of a new ‘skills levy’ would have a UK-wide distribution impact and align with Government aims of levelling up through regional economic growth.

Financial Services and Markets Bill

This Bill must set out clear requirements to ensure accountability for the regulators on meeting the new growth and international competitiveness objective. We want to see greater debate and challenge on proposed rules to ensure protection for consumers but in a cost-effective way for industry.  We urge Government to include a requirement for the FCA to set out in their consultation papers how proposals would operate towards facilitating and promoting the international competitiveness of the UK economy and its growth in the medium- to long-term.

The Budget is never limited to what the Chancellor says in the chamber - the devil in the detail is the ‘red book’ published shortly afterwards. We will make sure we report back to members whatever the outcome.

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!