A premium cap could be a powerful weapon in the fight for social mobility

Parliament have debated some weird and wonderful proposals since e-petitions were launched in 2011, from depriving convicted London rioters of any benefits they might be claiming to stopping Donald Trump from visiting the UK. Since they’re obliged to consider any petition that garners more than 100,000 signatures, they’re often put in the position of indulging suggestions that few MPs have any real intention of turning into legislation, and on the Monday they were put in just such a position again, when they debated the possibility of imposing a £1,200 cap on car insurance premiums for drivers aged between 18 and 25.

Sadly for young drivers, there doesn’t appear to be any realistic chance that a cap will be imposed, with the Government replying to the petition by simply advising, “shopping around for the best possible option before making any decisions is likely to benefit customers.” However, while it’s unlikely to bear any fruit, there’s much to be said in its favour, since aside from saving younger drivers heaps of money, it would have numerous positive knock-on effects for the UK as a whole, not the least of which is increased social mobility.

To begin with, it’s worth offering the reminder that insurance premiums are ridiculously expensive for younger drivers. At the moment, the average cost of annual car cover is over £1,400 for drivers below 25 years in age, compared to around £633 for all drivers as a whole. What this means is that some young drivers get quoted even more than £1,400, and while this is already bad enough as it stands, things are about to get worse now that the Ministry of Justice has decided to lower the Discount Rate from 2.5% to minus 0.75%.

Because of this reduction, premiums are expected to rise by between £50 and £75 on average, whereas PricewaterhouseCoopers went so far as to suggest that younger drivers (between 18 and 22 years old) could pay as much as an extra £1,000 a year. This may be somewhat alarmist as a prediction, yet it underlines how premiums are expected to continue not only rising, but rising beyond the point where many or most younger drivers can afford them.

In fact, this is already happening now, since the number of young people driving in the UK has fallen considerably in recent years. For example, the Department for Transport’s National Travel Survey revealed that, after having stood at 44% in 1995, only 33% of 17- to 20-year olds held a driving licence in 2015. And make no mistake, costs are a big culprit in this fall, with 43% of 17–20 year olds without a licence citing the price of insurance or driving lessons as the main reason for not learning to drive.

And even if the Discount Rate reduction adds £500 rather than £1,000 to the average premium for a young driver, this will still be more than enough to pull the percentage of 17- to 20-year olds on the UK’s roads even lower in the years to come. Such a decline will have dire consequences for the young people concerned and for the wider UK economy, largely because the reduction in physical mobility will lower young people’s prospects for obtaining education and employment.

For example, according to the aforementioned National Travel Survey, people in households without a car make around 300 fewer trips each year, and travel around 4,500 miles less each year. This is a staggering difference; one that shows how not having a car severely limits a person’s range of options when it comes to employment, confining people to a narrower area where it will be harder to find work.

Not only is this implied by the difference in trips made and distance covered, but it’s borne out by research into transport and poverty conducted by UCL in 2014, which concluded that not having a car “can exacerbate poverty by reducing access to key services such as employment, education and healthcare, lead to social isolation and reduce physical and mental well-being.”

And this mention of poverty leads back to the main issue surrounding the decline in car use among the young, which is that it seriously undercuts efforts to increase social mobility. Worse still, it exacerbates the generational gap that’s currently separating younger and older members of the population, what with the Institute for Fiscal Studies reporting last July that median incomes for 22- to 30-year olds have dropped 7% below pre-crisis levels, while pensioners “are now the least likely major demographic group to be in income poverty.”

While access to a car is certainly far from being the only factor causing this generational gap, it’s nonetheless important, if only because 38% of job seekers find that “transport [is] a major obstacle to their finding work.” This is something the Government ought to consider very carefully when it comes to the insurance premiums of younger drivers, especially because the Prime Minister has been so eager to declare her aim of turning Britain into “the world’s great meritocracy.”

As positive as this aim is, there’s little question that greater social mobility won’t be realised unless young people are given the means to pursue the jobs and the education they want and need. And if they’re forced to pay car insurance premiums far in excess of £1,200, then it’s clear that these means will be reduced, and markedly so. That’s why a premium cap is ultimately a good idea, even if it’s one that has little hope of being given the fullest possible respect by Parliament.

By Lyndsey Burton, founder of Choose.co.uk, a UK based price comparison site.