HC Deb 15 January 1998 vol 304 cc479-81
11. Mr. Syms

What is his policy for increasing saving by individuals. [21061]

Mr. Darling

This Government's policy is to encourage saving by as many people as possible. As we said in opposition and as we have said in government, it makes sense to encourage as many people as possible to save and make provision for whatever eventuality they think appropriate. To that end, we have ensured that we have the right economic conditions, with low inflation, that will encourage people to save. We have, of course, introduced specific proposals such as the individual savings account.

Mr. Syms

Will the Minister consider upping the £50,000 limit on the individual savings account, not only because of opposition to the proposal, but because of the real anger that my constituents feel? Their income is being squeezed by a man who is not only the architect of the scheme, but who has £12 million in the Channel Islands avoiding UK taxation.

Mr. Darling

The Government made it clear when we were in opposition that we would introduce the individual savings account, which extends the principles of tax-exempt special savings accounts and personal equity plans, which have been established for a number of years. The House must face the fact that both we and the previous Government have spent just over £1.3 billion a year in tax relief for the schemes. It makes sense to ask what we can do to encourage people who do not save at the moment to do so in future. The objective of the individual savings account is to increase the number of people who save, but who are at present not saving. That is good for them as individuals and good for the country as a whole.

Mr. Malcolm Bruce

I am slightly surprised that this question is not being answered by the Paymaster General. Does the Chief Secretary agree with the Treasury official who told the House of Commons Library on 5 January that tax relief on savings, after the introduction of the individual savings account, would be less than would have been available if PEPs and TESSAs had continued?

Mr. Darling

The hon. Gentleman raises two points. The Chief Secretary to the Treasury takes a great deal of interest in everything that happens in the Treasury. Indeed, I can tell any of my ministerial colleagues who read the report of this Question Time that I take a great deal of interest in what they do in their Departments. It should, therefore, come as no surprise that I should choose to deal with a subject about which I have said a great deal both in opposition and in government.

The Government do not know precisely how much they will spend on tax relief in any particular year because they do not know how many people will take up the option of saving, at the moment with PEPs and TESSAs, and in future with the individual savings account. As my right hon. Friend the Prime Minister has made clear, we are talking about rebalancing the tax relief that is available so that we encourage people who are not saving at the moment to do so in the future. There are many people who could well afford to save. It must be in their interests, as well as in the interests of the whole country, to save. I should have thought that the hon. Gentleman and his party, if not the Conservative party, would join us in supporting an objective that is widely supported in the country.

Mr. Fallon

Will the Chief Secretary confirm that, on the current gross dividend yield, annual income from £50,000 invested in a UK equities PEP is only £1,420? Instead of punishing middle Britain for saving, will he either scrap the limit or allow people to transfer any surplus into the type of offshore trust that is operated by the taxmaster general?

Mr. Darling

Yet again Opposition Front Benchers show that they have precious little interest in the cause of promoting saving. As I said, the Government—any Government—have a choice about how to balance the total amount that they are prepared to spend on tax relief to encourage people to save. Our view is that it is far better to use the available money, which will always be finite, to encourage people on middle and lower incomes who are not currently saving and need encouragement to get into the savings culture. That is our objective. I am bound to say that the vast majority of those with an informed opinion, who have sat down and thought about the matter, support the Government's objective, which is to encourage those who are less well off to make provision for themselves.

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