§ I propose to increase insurance premium tax, which applies to most general insurance, to 4 per cent. Three quarters of all insurance—including life insurance, and other long-term insurance—will remain exempt. Insurance remains undertaxed for consumers compared with other services in this country.
The introduction of the tax—I made it a very low rate—did not harm the healthy insurance industry that we have. Most companies absorbed the tax, and some premiums actually fell for a time. Even after this further modest change—which I think is lower than many people expected—the overall rate of insurance premium tax in the UK remains very low, lower than in almost any other European Union country.