§ Second, we have always tended to tax financial services in this country much more lightly than other sectors, including manufacturing. In this Budget, I have decided to tackle one sector of this industry which is exempt from VAT. Virtually every other member state charges an ad valorem tax on insurance premiums. I propose now to do the same.
§ The rate will be only 3 per cent., among the lowest in Europe, and the tax will apply to most general insurance of risks located in the United Kingdom. It will come into force next October, and will raise over £750 million in a full year.
§ To avoid driving business offshore, I propose to exempt the reinsurance of risk, and the insurance of most ships, aircraft and international transit goods. To avoid taxing exports, I propose to exempt export credit; and to avoid taxing savings, I shall exempt long-term insurance such as life assurance, including assurance for endowment mortgages.
§ For the typical family with motor, home contents and building insurance, this tax will cost about 35p a week.