Tax cuts will help ailing insurers

The Association of British Insurers (ABI) insists that the proposed reduction in VAT from 17.5% to 15% will save the insurance industry at least £70m a year. As many insurers have been struggling in the hostile financial climate this could make all the difference to troubled companies.

The ABI stated that in 2007 the insurance industry was hit by £495m in irrecoverable VAT costs; if VAT was cut to 15% this figure would have been reduced to only £424m.

With so many institutions struggling to stay afloat during the current economic crisis caused by the credit crunch, this move may be enough to save jobs and keep premiums down.