HC Deb 13 May 1976 vol 911 cc647-9
2. Mr. McCrindle

asked the Chancellor of the Exchequer how many representatives he has received since 6th April on the proposed new method of life assurance tax relief.

Mr. Robert Sheldon

None until the past week, since when I have received about six.

Mr. McCrindle

Is it not inevitable under the proposed new system that for a period at least there will be a substantial effect on the investment income and the cash flow of insurance companies? What consideration have the Government given to the effect that this will have on bonuses payable under endowment policies, particularly terminal bonuses, which are paid only in the year in which the policies mature?

Mr. Sheldon

Consultations have been held with the Life Assurance Offices. They are quite content with the arrangements, and I confirm that to the hon. Gentleman. In the introduction of this system, considerable representations were made. There was a request for such representations. The consultations have been extraordinarily effective, and that will be seen, I hope, in the working of the arrangements.

Mr. Ridley

Why does the Chancellor's meanness extend to the point of stopping people saving more than £ 1,500 a year in life premiums?

Mr. Sheldon

The whole basis of the scheme was a simplified operation. A figure had to be selected. I should have thought that £ 1,500 was quite generous. It allows many people on an income of less than £ 9,000 a year to get considerable advantages as a result of the introduction of this new scheme. Those in excess of that income will have plenty of time to make arrangements, because the starting date is not until 1979–80.

Mr. Nott

Many pensions in the public sector are based upon the final year's salary and employees' pension schemes certainly allow much greater contributions than would be allowed under the arrangements now proposed with the limit of £ 1,500. Why is this double standard being used? Surely it is right that there should be comparable arrangements in all fields of savings for pensions. Will the Government look at this matter again, or anyhow make some concessions during our debates?

Mr. Sheldon

These matters will be subject to the scrutiny of debate. I would not for a moment dream of trying to impinge upon those rights of the Opposition. These arrangements are not only satisfactory but beneficial to the large majority of people who save through the life assurance method. The advantage that we give, not only to those people but, in the simplicity of operation, to all those concerned with it, is very considerable.

Mr. Hugh Fraser

The hon. Gentleman has not answered the point at all. Even with the present rate of inflation, civil servants have guaranteed pensions related to their final year's salary, but the whole of the private sector is grossly penalised. It is absolute gobbledegook for the hon. Gentleman to talk about its being to the benefit of the large majority. It is to the benefit of only civil servants, not to the private sector at all.

Mr. Sheldon

No. The life assurance method is not the only method available for saving for the ordinary individual. There are other methods for which tax relief is available. The £1,500 limit is based on a comparison with what happened previously under the old scheme of particular allowances for life assurance. The person who gets £8,000 a year gains considerably as a result of these provisions. The person who has been saving at a higher rate will continue to get the benefit, during the next few years at any rate.

Mr. Nott

I am sorry to come in again. Will the hon. Gentleman say what are those other methods by which the self-employed and others can set aside money with tax relief? Secondly, is not a permanent secretary on an income of, say, £12,000 to £15,000 a year able to set aside far greater sums in the public sector pension scheme than are allowed to ordinary people through life assurance policies?

Mr. Sheldon

The hon. Gentleman must surely have heard of self-employed annuity policies, the allowances for which are being substantially increased this year to meet the very point that the hon. Gentleman makes.