The insurance lobby has wasted no time in seizing on the chancellor’s national insurance u-turn to push its immediate policy goal- a u-turn on the discount rate affecting compensation for the injured.
Philip Hammond today dropped plans unveiled in last week’s budget to increase national insurance contributions by self-employed people.
That decision – which followed a backlash from Conservative backbenchers – leaves question marks over how to fund spending commitments on education and health.
In a letter from Hammond to the Treasury Select Committee chair, the chancellor said the cost of the NI reversal ‘will be funded by measures to be announced in the autumn budget’.
James Dalton, director of general insurance policy for the Association of British Insurers, said today that Hammond should now reverse her decision and plug the funding gap.
Dalton said: ‘The government can fill the void in its accounts from today’s NICs U-turn by bringing in a more sensible discount rate used to calculate personal injury compensation.
‘As last week’s budget confirmed, the ill-judged decision to reduce the discount rate to -0.75 per cent will lead to a massive £6bn hit on the NHS so this seems an obvious course of action to take.’
Insurers estimate the discount rate change will cost the industry billions. The new rate comes into force on Monday, but applies to personal injury cases where damages have yet to be established. There have been reports from claimant firms that insurers have cancelled settlement meetings since Truss announced the revised rate.
Legal expenses insurer ARAG has described the ABI’s response to Truss’ decision – in which the association used the word ‘crazy’ – as giving the impression of an industry that may be ‘shallow, self-interested and heartless’.