§ Next, there is the personal sector. The encouragement of personal saving in all its forms is a major objective of Government policy, and we have recognised this in the changes which we have already made in the system of personal taxation. A high level of saving is important for a number of reasons. In the first place, it provides the funds out of which the nation's investment needs can be financed, and in this way it contributes to the achievement of steady and sustained growth.
§ Secondly, saving brings security and independence for the individual. Thirdly, as successive Chancellors have pointed out, savings and taxation are in a very real sense alternatives. The more people save, the less Chancellors have to tax them. To be more specific, the most recent figures for total personal savings show that in the first three-quarters of last year, they were nearly £600 million higher than they were in the corresponding period of the year before. This meant that, given our objectives for the growth of the economy, the need for taxation was at least £600 million less than it would otherwise have been.
§ Within the total of personal savings, National Savings are of particular significance in present circumstances. As a source of Government borrowing, they are 257 an important factor in the fight against inflation.
§ Once again, over this past year, National Savings have been highly successful. Although in recent months the flow of National Savings has no doubt been affected by the general rise in interest rates which has added to the competition for funds, at the end of January the amount held by the public in all forms of National Savings was over £10,000 million, some £800 million more than a year earlier.
§ At this point I want to pay tribute to the dedication of the members of the voluntary savings movement under the leadership, in England and Wales of Sir Robert Bellinger, and, until he retired recently after seven years in office, of Lord Birsay, who was Chairman of the National Savings Committee for Scotland. This tribute is no mere formality, for those men, and the Savings Committees under them, are a remarkable example of voluntary service.
§ As the House knows, I have already taken some action to ensure that good progress is maintained. In particular, the rates of interest in the ordinary and investment departments of the Savings Banks were recently increased.
§ I expect to receive very shortly the Report of the Committee to Review National Savings which I set up two years ago under the chairmanship of Sir Harry Page. I do not want to propose too many extensive changes in National Savings when that report is so near to completion. On the other hand it is essential that the range of National Savings facilities should remain fully competitive, and I am therefore making the following changes.
§ First, the maximum permitted holding of the decimal issue of National Savings Certificates will, from tomorrow, be increased from £1,000 to £1,500. This will provide the opportunity for additional investment to those people already holding the present maximum.
§ Second, there will be a new issue of British Savings Bonds with improved terms. The new bond will be sold in multiples of £5, will have a life of five years and a maximum holding of £10,000. In these respects there is little change from its predecessors. The rate of interest, however, will be increased from 7 per cent. to 8½ per cent. with a tax-free bonus 258 on maturity of 3 per cent. The new bond will be on sale by about the end of May.
§ Third, Premium Bonds, by adding ⅛th per cent. to the rate of interest, it will be possible to double the weekly prize money. In addition to the existing prizes, therefore, there will, from July, be a further 25 prizes of £1,000 each, every week. Bonds bought this month will be in time to qualify for the July draw. With all the other prizes, the total prize money going to Premium Bond holders will then be £50 million a year.
§ Fourth, I have decided that a depositor with an account in the ordinary departments of the National Savings Bank or the Trustee Savings Banks should be able to hold up to £1,000 without incurring any income tax liability on the interest earned. The exemption limit will accordingly be raised from £21 to £40. This increase in the exemption limit will come into operation for the year of assessment 1974–75, but will effectively cover interest received in 1973–74 in all those cases where, as is usual for accounts continuing over a period of years, the liability for any year of assessment is based on the amount received in the preceding year.
§ Taking account of all these measures—the new tax deposit accounts, the new long-term stock, the new low-coupon issue and the new arrangements for National Savings—I expect during the coming year a considerable increase in the net sales of Government obligations of one sort or another to the non-bank public.