§ Mr. HinchliffeTo ask the Chancellor of the Exchequer (1) on what basis his Department calculated that introducing a higher rate of insurance premium tax would yield £235 million in its first year of operation; and if he will make a statement; [11465]
(2) what forecast yields have been calculated for 1997 to 2002 for the increased revenue of insurance premium tax in respect of insurance sold with television hire; on what basis those calculations have been made; and if he will make a statement; [11466]
(3) what forecast yields have been calculated for 1997 to 2002 for the increased revenue in respect of insurance premium tax at a rate of 17.5 per cent.; and if he will make a statement. [11467]
§ Mr. Oppenheim[holding answer 22 January 1997]: The estimated tax revenue yield of £235 million in 1998–99 is the yield from charging the higher rate of insurance premium tax on travel insurance, mechanical breakdown insurance and insurance sold with TV and car hire. The estimate uses data from a number of sources including the Association of British Insurers and is consistent with the Budget costings methodology explained 424W in annex A to chapter 6 of the 1997–98 "Financial Statement and Budget Report". It therefore incorporates assumptions about changes in behaviour in response to the increased rate of insurance premium tax; but excludes any affect of the tax change on the overall level of income and spending.
The 1997–98 "Financial Statement and Budget Report" estimated the revenue yield from the introduction of a higher rate of insurance premium tax to be £160 million, £235 million and £260 million in 1997–98, 1998–99 and 1999–2000 respectively. Approximately £20 million, £25 million and £30 million of this is attributable to the higher rate insurance premium tax on insurance sold with television hire.