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AA issues emergency Budget warning

Increase in insurance tax could lead to crime
Chancellor with red briefcase

Increasing insurance premium tax (IPT) in the emergency Budget could lead to a sharp increase in the number of uninsured drivers on UK roads, the AA has warned.

The comments come amid speculation that the coalition government could double IPT, which is payable on all insurance products including home and car insurance cover, from 5% to 10%. According to the AA, this additional cost would be passed on to consumers and could disadvantage the most vulnerable.

Edmund King, president of the AA, said that although there is a ‘gigantic hole’ in the public finances, taking the decision to increase IPT in the emergency Budget next Tuesday could lead more people to break the law by failing to buy insurance.

‘My fear is that increasing IPT will be the last straw for many people and that they will just not bother with insurance at all, which in turn will put further pressure on the premiums paid by honest motorists. It could also lead to more hit and run casualties as the uninsured don’t want to wait around to face the music.’

Emergency Budget worries

Mr King also raised concern about the impact an increase in IPT could have on families who are struggling to afford their home insurance premiums. When times get tough, he argues, home insurance cover is one of the first financial products people are likely to abandon.

He said: ‘The cost of roadside breakdown cover would also attract any increase in IPT and that could lead to cash-strapped motorists, who are already suffering record fuel prices, letting their cover lapse and risking big bills for recovery.’

Which? car insurance expert Dan Moore Said: ‘No one wants to pay for insurance at the best of times and any move that makes this an even more unpalatable pill to swallow could encourage more people to risk driving without insurance.’

If you are concerned about the cost of your essential insurance products, check out the Which? car insurance and home insurance reviews. We compare cover on the basis of quality as well as cost, to ensure you get great value for money.

Emergency budget

Chancellor of the Exchequer George Osborne will deliver the government’s emergency budget on Tuesday 22 June, and you can follow his speech as it happens on the Which? Money 2010 emergency budget liveblog.

Sign up now for an email reminder to join us for the Chancellor’s budget speech, and come back to on the day to get the Which? Money take on the budget and to add your questions and comments.

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