AA urges Chancellor to keep his hands off IPT and fuel duty

Motorists fear IPT and fuel duty hikes could be budget ‘quick wins'

Last IPT rise contributed to record rise in car insurance costs

Low fuel price ‘not an excuse to increase duty’

The AA has written to the Chancellor of the Exchequer urging him to resist hitting motorists and businesses again in the forthcoming budget.

Edmund King OBE, AA president, says he is concerned that the Chancellor may consider Insurance Premium Tax (IPT) and car fuel duty hikes to be a ‘quick win’ to increase revenues. He points out that the cost imposed by the 58% increase in Insurance Premium Tax (IPT), which came into effect in November 2015, added up to £18 to the average quoted premium for a car insurance policy.

“It contributed to the biggest quarterly leap in in the typical quote for car cover since 2010 (10.4%), coming as it did at a time when car insurance premiums had started to rise thanks to growing claims costs associated with fraud and whiplash injury.

“In an AA-Populus poll in July 2015, only 11% of almost 30,000 respondents thought the increase was justified while 87% considered an increase in IPT would encourage more uninsured driving.”

Similarly, the increase in IPT also affects the cost of roadside assistance and has landed a £12m additional cost on the AA’s business.  The same poll showed that 72% of AA members were not aware that their roadside assistance cost included IPT.

Mr King points out: “Any additional increase in IPT would simply discourage motorists from taking out any roadside assistance cover, exposing them to potentially crippling costs for emergency recovery in the event of a breakdown. The IPT hike from the last budget is a double-whammy that only affects drivers as it hits insurance and roadside assistance costs, particularly hurting those on low incomes; and young drivers, who pay the highest premiums.”

Mr King also says that although the cost of fuel has fallen over recent months, it remains a significant part of a driver’s weekly spend.

“The country is emerging from recession and there is greater confidence among British families.  Not only do hard working families rely on low fuel costs for their day-to-day driving but industry is also dependent on motor fuel for deliveries and mobility of their workers.

“The AA doesn’t expect low fuel prices to endure given the commodity markets are looking to lift the price of oil.

“We welcome the Government strategy to shield motorists from duty rises in the past because of previous fuel price volatility.
“But we urge the Chancellor not to use low fuel prices as an excuse to increase fuel duty now.”

A separate AA-Populus study completed on 23rd February showed that only 12% of members agreed that fuel duty should be increased to help public finances.