My Lords, I certainly agree with the noble Lord, Lord Howarth, about the incentive argument. I thought that that was comprehensively
demolished at Second Reading and I hope that we are not going to hear it again from the Minister this afternoon.
I also think that my noble friend should pay attention to the fact that this was one of the subjects on which all the speakers at Second Reading were unanimous in saying that 70% was simply unacceptable. Whether it should be 100%, 90% or some other figure much higher than 70% could be a matter of argument between us. However, there are certainly very strong reasons for saying that the 30% deduction is totally unfair and unacceptable to the majority of your Lordships.
My noble friend said at Second Reading that he was keen to avoid the insurers passing all, or virtually all, of the levy on to existing insurers. As the noble Lord, Lord McKenzie, said, this would not require a very large increase in the premiums to be imposed. It is logical to assume that insurers would also be constrained by the effects of competition. Some might be inclined to pass the whole burden on to other insurers, but would be constrained from doing so by the thought that if others did not then they would obtain all the business. The threat of the insurers passing on the burden is a very slight one.
If there were an increase from 70% to some higher figure, that would not happen suddenly. Presumably, a proportion of the insurers might pass on some of the burden as we approach 100%. I do not think that the Minister has any objective evidence to show to what extent this would happen. I would be very glad to hear from him if he thinks that there is evidence of something that must be hypothetical and cannot intrinsically be tested without actually trying it.
7.30 pm