HC Deb 06 July 2004 vol 423 cc765-75

'(1) The Individual Savings Account Regulations 1998 (SI/1998/1870) shall be amended as follows.

(2) In paragraph (2) of Regulation 4—

  1. (a) the words "£7,000 for the years 1999–00 to 2005–06 and £5,000 for subsequent years," shall be replaced by "£7,001"; and
  2. (b) the words "£3,000 in the years 1999–00 to 2005–06 and £1,000 in subsequent years" shall be replaced by "£3,001".

(3) In paragraph (2A) of Regulation 4, the words "£3,000 in the years 2001–02 to 2005–06, and £1,000 in subsequent years" shall be replaced by "£3,001".

(4) In paragraph (2B) of Regulation 4, the words "£3,000 in the years 2001–02 to 2005–06, and £1,000 in subsequent years" shall be replaced by "£3,001".

(5) In paragraph (3)(a) of Regulation 4, the words "£3,000 for the years 1999–00 to 2005–06, and £1,000 for subsequent years" shall be replaced by "£3,001".

(6) In paragraph (2) of Regulation 7, after sub-paragraph (a) insert—

"(aa) shares, not being shares in an investment trust, issued by a company wherever incorporated and traded on the market known as OFEX;".

(7) In paragraph (5) of Regulation 7, after sub-paragraph (c) insert—

"(d) that the securities are traded on the market known as OFEX.".'.—[Mr. Prisk.]

Brought up, and read the First time.

Mr. Prisk

I beg to move, That the clause be read a Second time.

Madam Deputy Speaker

With this it will be convenient to discuss new clause 6—Tax credits for ISAs and PEPs— 'Section 76(1)(a) of the Finance Act 1998 (c. 36) shall cease to have effect.'.

Mr. Prisk

I begin by declaring that I have two individual savings accounts—sadly, I do not have any more than that—and that a member of my family works for the Financial Services Authority.

New clause 5 seeks to highlight the Government's plans further to diminish the benefits of ISAs by reducing the tax-free limits for savers and to include investments through the Ofex market, which is a key source of funds for many of the UK's smallest ventures, in the ISA wrapper. As such, it is a probing measure that seeks to help savers and stem the loss of confidence in ISAs.

The Government accept that Ofex securities should be included within the ISA tax-free wrapper, but they have unfortunately decided to defer that change for nearly two years until April 2006. Ofex is a highly effective source of finance for our smallest enterprises. Indeed, it is specifically focused on the £500,000 to £5 million to £10 million range, and it is generally accepted as offering an excellent means by which to bridge the equity gap. It is therefore peculiar that, given the Government's stated commitment to closing that gap, the Treasury should wait for two years before acting.

The second problem with that delay is that alternative investment market securities are already eligible, so there is a danger that a distortion could occur in the market and, indeed, in savers' investment decisions. Given that AIM securities tend to favour larger companies, the smallest enterprises might continue to lack funds, which the Government say that they want to encourage to be brought forward. Given the inclusion of AIM securities, why not include Ofex? Our smallest enterprises deserve the same chance of capital investment, so why wait?

The other aspect of new clause 5 is the retention of the established tax-free limits for savers in ISAs. Saving is sadly in danger of becoming a lost habit in this country—the ratio for savings has halved since 1998, and net retail investment in funds last year was among the worst in the past decade. The Government's decision to reduce the tax-free limits from £7,000 to £5,000 on maxi ISAs and from £3,000 to £1,000 on cash ISAs will only make things worse.

A recent survey by Invesco Perpetual shows that 35 per cent. of current equity investors will reconsider their investment, and 17 per cent., which is nearly one in five investors, may choose not to invest at all. Mr. Mike Webb, head of distribution for Invesco Perpetual, said: Our research proves that people are angry and confused by the Government's planned changes. The Government needs to be clear on what it wants to convey to investors. It talks openly about people needing to provide for their future, yet it plans to take away the very thing—tax incentives—that encourages people to save in the first place. Mr. Webb is right.

If saving is to be encouraged, the Government are sending out the wrong signals by cutting those limits. The result could be that the savings ratio falls still further, leaving future generations increasingly vulnerable to events. We now need a period of stability for savers prior to any review in 2006; in other words, the limits should remain as they are. After all, what credible alternatives are the Government offering? Can the Minister tell us, for example, why savers should commit themselves over the next two years to a savings product that the Government are running down? In the absence of a credible Government alternative, does not the Minister recognise that a two-year hiatus will only further erode people's willingness to save?

4.45 pm

The Government have committed themselves to a review in 2006, but what does that mean in practice? Will a review begin in 2006, or will the Government present their final decision in that year? If it is the latter, does not that further extend the delay? I hope that the Minister will be able clearly to set out, both for savers and for the financial services industry, exactly what the commitment means and when we can expect decisions and statements.

New clause 6 would reverse the Government's abolition of the 10 per cent. tax credit received by savers on their dividend payments. That would help current savers and future generations alike. In particular, it would ensure that all taxpayers, rich or poor, enjoyed the same incentives to save. I stress that this is a probing new clause.

The tax credit originates from the advance corporation tax regime that the Chancellor abolished in 1997. Hon. Members will recall that the result of that decision was to slash £5 billion a year from the value of people's pensions and investments. That was, frankly, an act of daylight robbery that will cost millions of people thousands of pounds. What is worse, many of those people remain, even today, unaware of just how much the Chancellor has short-changed them. It was, and still is, the worst and most insidious of this Government's stealth taxes.

When the Chancellor raided our savings and pensions in 1997, he also cut the dividend tax credit to 10 per cent. and the dividend income tax rate to 32.5 per cent. for higher rate taxpayers. Then, in the Finance Act 1998, he sought the abolition of the tax credit altogether, with effect from April this year. The net result, ironically, discriminates in favour of higher rate taxpayers over everyone else. The combined effect of the changes to the dividend tax credit and income tax rates strips away any tax incentive for basic rate taxpayers to invest in an equity-based ISA. Cash and bonds are still worth it, but not shares. Do not the Government believe that everyone who is trying to save should enjoy similar tax incentives? Why discriminate by precluding basic rate taxpayers from something that the richest in the land can enjoy? I hope that the Minister will be able to show us where in Labour's manifesto it says that Labour will provide a tax break for the few, not the many.

Last year, when my party tabled a similar new clause, the Minister argued that the markets, not the Government's actions, were encouraging people to invest in anything but shares. Since then, the stock markets have improved, yet there is still a residual problem. The recent survey conducted by Invesco Perpetual found that 47 per cent. of equity ISA investors will be less likely to invest in those ISAs because of this abolition—nearly half of investors are turning away from equity ISAs. Indeed, 13 per cent. said that it will put them off saving altogether. As the PEP and ISA Managers Association and the Investment Management Association said in their recent paper of earlier this year, ISAs are a successful and simple savings product and should be at the centre of the Government's strategy to encourage long-term savings. This is not the time to be undermining them. The Government like to claim that any tax benefits are small, with the average tax credit being around £25. In fact, the actual benefits will vary widely. The whole point of saving is that every pound counts, especially over the long term, and every time the incentives diminish, the savings habit declines. Is that the Government's intention, or an unintended consequence of their proposals? I hope that the Minister will be able to tell us.

Indeed, in total tax terms, the benefit of this abolition will be far from small for one organisation. The Treasury has failed to highlight the small fact that the Inland Revenue expects to save £200 million every year. That is £200 million that will be lost to savers. Another result of the abolition of this tax credit will be to skew savers towards cash and bonds, distorting the market and therefore distorting prices. Equally, some investors might be pushed towards cash-based and bond-based ISA products when an equity-based product might be far more suitable for their needs. The Government are rightly quick to condemn advice that encourages savers to choose inappropriate products, yet here we have a policy that could well have exactly that effect. Never mind mis-selling, this is mis-taxing, and I wonder who will police the Treasury. This is another example of the Government's meddling with the tax system distorting people's decisions and investments, to their own and the markets' detriment.

The Conservative party believes that the halving of the savings ratio represents a dangerous trend, which the Government have at best neglected and at times encouraged. Savers have been short-changed by Labour, not least by the abolition of advance corporation tax. We believe that savers need certainty and encouragement, and we want to hear why the Government are intent on further eroding the incentives to savers in the absence of any credible alternative. The new clauses seek to encourage savers and to help small enterprises. I hope that the Government will be wise enough to think again on this, and I look forward to the Minister's reply.

Ruth Kelly

The hon. Member for Hertford and Stortford (Mr. Prisk) has outlined the reasons behind his new clauses. The effect of his proposals would be to change the current secondary legislation, the regulations that govern investment in ISAs, through the Finance Bill and to reintroduce the 10 per cent. payable tax credit into the ISA.

The effects of new clause 5 would be twofold. First, it aims to extend the maximum investment limits for an ISA from £7,000 to £7,001 indefinitely. It would also increase the maximum amount that could be invested in cash savings within an ISA to £3,001. The purpose of that would be to retain the current annual investment limits for an ISA. The ISA regulations currently provide for these to be reduced in April 2006. The second effect would be to allow ISA investors to invest directly in stocks and shares traded on Ofex. Although Ofex is regulated for certain purposes—such as market abuse and insider dealing law—it is not a recognised stock exchange for the purposes of the Inland Revenue. Investors are therefore currently excluded from directly holding shares in companies traded on it within their ISA

. New clause 6 aims to reintroduce the 10 per cent. payable tax credit into the PEP and ISA regime. This credit was, until April this year, paid on top of UK dividends received on investments held in a PEP or ISA. I should like to cover each of these proposals separately, as each raises quite different issues. I shall deal first with the ISA investment limits. ISAs are the Government's primary vehicle for tax-free savings outside pensions. They have helped to make saving easier for ordinary investors. We do not believe that amending the ISA limits in the way the hon. Gentleman suggests would be appropriate at this stage, for the reasons that I shall set out.

When the ISA limits were first announced in the Budget in 1998, we made it clear that ISAs had two key objectives. The first was to develop and extend the savings habit. The second was to ensure that tax relief on savings was more fairly distributed. The aim was to rebalance the tax benefits provided through the PEP and TESSA, and to focus more on encouraging non-savers to start saving and those who saved little to save more. To achieve that, the maximum limits for investment were set at £5,000, with a maximum of £1,000 in cash savings, but for the first year those limits were increased to £7,000 and £3,000 respectively, to encourage take-up and to smooth the transition to the ISA. Those higher limits were subsequently retained until 6 April 2006, which is more or less two years from now. I put it to the hon. Gentleman that those limits are extremely generous: they have allowed savers to build up very substantial sums in savings, free of tax, as the amounts that they subscribe to the ISA accumulate year on year. Therefore, we need to keep the limits under review, to ensure that the ISA is still achieving its objectives.

The ISA has already started to change savings habits. Fifteen million individuals have invested in an ISA account, saving around £130 billion—one in three of the adult population are saving in an ISA, which is a far greater number than ever saved in a PEP or TESSA. The ISA has also been extremely successful in attracting individuals from groups who were previously underrepresented in the PEP and TESSA. Around one in five ISA savers, for example, are from lower-income groups, compared with one in seven who had either a TESSA or PEP. Similarly, the number of people under the age of 25 with an ISA is more than double the number who had either a TESSA or PEP.

We are not complacent, however. Of course, we continue to keep all savings incentives under review, which is one reason why we are piloting the savings gateway scheme, which aims to provide more effective savings incentives to those on low incomes, who benefit less from the tax incentives provided through an ISA. It is also why, for example, we have developed the child trust fund, to provide children with the financial education that they need to understand their savings options, and to ensure that in the future, all children have some form of financial asset available to them at the age of 18—

Mr. Prisk

Will the Financial Secretary give way?

Ruth Kelly

Before I give way to the hon. Gentleman, I urge him to consider that there are two years to run before the ISA limits are due to change. We announced the higher level as a transitionary measure to ensure the success of the ISA and to encourage people to save. We will, of course, continue to review the ISA limits. We have made no announcements on that, subject, of course, to the 10-year guarantee provided by the Chancellor that savers should benefit from tax relief on up to £5,000 in savings each year until at least 2009.

Mr. Prisk

Why would a saver wish to invest in a product to which the Government seem to have no commitment over the next two years? Does not the Financial Secretary understand that if an individual is trying to save for the next five, 10 or 15 years, the knowledge that that is a product in which the Government seem to have little confidence, because they are diminishing its effect, leaves open the question: why would one bother? Of course, that would further lower the savings ratio.

Ruth Kelly

The hon. Gentleman has a perverse view of the effects of the Chancellor's announcements. In fact, going back to the introduction of the ISAs, the higher limit was introduced purely as a first-year measure to encourage take-up in the initial year. The next positive announcement made by the Chancellor was to extend that until April 2006. We have not yet commented on what we will do after that, although, of course, we keep the limits under review. As the ISA regulations stand, however, they are due to end in April 2006.

Mr. Prisk

Will the Financial Secretary give way?

Ruth Kelly

I give way to the hon. Gentleman, but I have not yet finished covering his first point.

Mr. Prisk

I am keen to try to draw out the full detail. What I am concerned about is the transition period. Given that in the past few years, under this Government, the savings ratio has fallen, does this not simply compound the existing problem? I could understand it if the savings ratio were booming—there might be an argument at that point. Given that it is falling, however, how can she do it?

Ruth Kelly

The hon. Gentleman may have noticed that I had some debate with the right hon. Member for West Dorset (Mr. Letwin) last night about the relevance of the savings ratio as an indication of long-term savings in this country. I would argue that it was artificially high for periods during the late 1980s, as inflation was high: people were retrenching their finances, and saving as a precautionary measure in those circumstances. If we consider the Bank of England analysis of the savings ratio adjusted for inflation, we have a significantly higher savings ratio now than we have had historically. Of course, we are not complacent, and millions of people are under-saving for their retirement. That is why we have introduced our informed choice strategy, alongside a new suite of Sandler stakeholder products. We could have a long debate about savings now, but perhaps you will agree, Madam Deputy Speaker, that we should focus on the amendments and new clauses under consideration today.

Of course, we have a commitment to the ISA. We have made it absolutely clear that there is a 10-year guarantee on ISAs. Savers can benefit from tax relief on up to £5,000 in savings, each year, until 2009. We are committed, on an annual basis, to reviewing the tax reliefs, to make sure that the product remains attractive and meets the underlying objectives, which I set out at the beginning of my comments: to provide an attractive savings environment while ensuring that tax relief is more fairly distributed among all taxpayers. While we are considering the position with respect to ISAs, we are also encouraging savings in a number of other ways that I have already described, including the savings gateway and the child trust fund. We shall continue to test our measures against the objectives that they are designed to meet.

5 pm

The hon. Gentleman is correct in his claim that ISA investors cannot hold stocks or shares traded on Ofex, but he is not correct about AIM. It is not a registered exchange, and therefore does not meet the criteria either. ISA investors who choose to invest directly in stocks or shares are limited to those listed on a recognised stock exchange. There are good reasons for that. The ISA is by its nature aimed at the less sophisticated investor. These are individuals who historically would not have considered investing in stocks or shares. It is only right that we initially encourage people to invest in products that are regulated in a way that gives investors an appropriate level of protection. That is what the UK listing rules aim to achieve. Similar aims apply to recognised stock exchanges worldwide. Other markets that are not recognised stock exchanges are not always subject to such requirements. For individuals who wish to invest directly in stocks and shares, we believe that it is still right to restrict investments to stocks and shares quoted on a recognised stock exchange.

Mr. Flight

If the Financial Secretary believes in what she has just said, why is she arguing in a different context that no such investment restrictions should be placed on the same individuals' stakeholder pensions?

Ruth Kelly

That is probably what caused the confusion in the mind of the hon. Member for Hertford and Stortford, because we are liberalising the pensions regime. We had a long discussion in Committee about why that was appropriate. I do not intend to repeat all the arguments that we had then about why ISAs aimed at retail investors should be treated differently. The hon. Gentleman has had sufficient opportunity to rehearse those arguments.

It would not be desirable to add Ofex to the ISA without considering the wider implications and ensuring that fair treatment is given to all markets. Let me give a couple of examples. First, in the light of EU requirements, we could not add an unrecognised market in the UK without extending the same treatment to other unrecognised UK markets, and potentially to all similar markets in the EU including those in the new member states. Indeed, there might be pressure for the extension to be made worldwide. We are talking about a fundamentally different proposition in respect of ISAs. Secondly, unlisted companies traded on markets that are not recognised stock exchanges also potentially benefit from a different range of tax incentive schemes to encourage wider investment. It is surely only right for us to consider whether they should continue to benefit from those schemes before giving investors in those companies access to tax benefits available only for investments listed on recognised stock exchanges.

Again, we shall continue to keep the savings incentives provided through the tax system under review, especially in the light of wider developments in the savings and investments arena; but on balance we think it inappropriate to make the changes proposed here without proper consideration of all the wider factors.

The 10 per cent. payable tax credit was removed for ISA purposes in April 2004. It was abolished more generally in 1999 as part of our wider corporation tax reforms. I understand that there is a heated debate in this place about the merits of those reforms, but as the hon. Gentleman knows, they were aimed at removing a major distortion in the tax system which encouraged companies to pay out their profits as dividends rather than retaining them for reinvestment in the business. The intention was to create a more profitable UK business sector over the longer term through productive investment, and more wealth for the UK economy and investors as a whole.

When the retention of the tax credit for the ISA and PEP regimes was announced in March 1998, the Chancellor made it clear that it was only a transitional measure—for a period of five years, up to 5 April 2004— to give investors time to adjust their portfolios. Outside the PEP and ISA, only a non-taxpayer would have benefited from the payable tax credit; but non-taxpayers investing in shares outside an ISA or PEP have not had the benefit of the tax credit since 1999.

The payable tax credit was paid to all ISA investors, whether they were higher rate, basic rate, starting rate or non-taxpayers, at a cost to the Exchequer of around £250 million a year. The withdrawal of payable tax credits for ISAs and PEPs simply means that an additional payment is no longer being made—an additional payment that mainly benefited higher rate taxpayers and people with a lot of capital to invest.

The change does not affect all ISA savers. Of the 15 million people who have saved through ISAs since 1999, only 6 million could be affected by the change, and that is if the ISA stocks and shares investment that they hold provides income through dividend payments. In addition, we think that around 1.6 million PEP investors may be affected.

I accept that there has been a lot of concern about the impact on basic rate and lower rate taxpayers and non-taxpayers but, as we made clear in the debate last year, the average payable tax credit received each year per person was worth only £25, a fact to which the hon. Gentleman referred. In reality, the vast majority of ISA investors saw far less than that. Over half of the investors benefited by less than £10 a year, and two thirds benefited by less than £20 a year.

Only 3 per cent. of basic rate taxpayers investing in shares within an ISA will have their tax benefits reduced by more than £100. Those are investors who have taken advantage of the ISA investment limits to build up high levels of tax-free saving and who have already benefited from the additional generosity of the payable tax credit over the past five years. All investors, however, including those holding shares through ISAs and PEPs, should benefit from the improved long-term company performance resulting from the 1999 corporation tax reforms.

I do not think that the new clauses are appropriate, necessary or desirable. I ask hon. Members to reject them.

Mr. Andrew Mitchell (Sutton Coldfield) (Con)

I draw the House's attention to my interests, which appear in the Register of Members' Interests.

I support the new clause so ably introduced by my hon. Friend the Member for Hertford and Stortford (Mr. Prisk). As he rightly said, it is clearly a probing measure. It is designed not to increase the limits on the financial instruments by £1 but to test the Government's view on these important matters.

I was struck by the fact that the Financial Secretary quoted Government comments in 1998 and spoke of the importance that the Government said should be attached to—I think I quote her exactly—getting the savings habit. She said that the Government wanted to send some signals about saving in the measures that they introduced in that year. All I can say is that I believe that the Government, in the whole area of savings, which are important to all of us in our individual lives, have shown extraordinary complacency in the way in which they have allowed their policies on savings to develop.

The Government certainly mouth the mantra of saving. We have had lots of new policies, new initiatives and an unbelievable number of consultations but, when the savings ratio is at an all-time low, it is clear that the Government pay little attention, if any, to the serious risks for all of us in the lack of savings in our economy—risks that do not pertain hugely to the highest earners in the land but very much pertain to those in middle Britain, the many ordinary people whose savings are now so low and whose security in old age will be at great risk as a result.

The Government's attitude to savings is epitomised by their response to the new clauses. How have we got ourselves into this dreadful position with savings? The Chancellor of the Exchequer is, rightly, desperate to maintain the strong economy, but it is underpinned by consumption, a housing boom, enormous debt, which the shadow Chancellor set out in the House last night, and a massive Government job-creation scheme. As a result, the Chancellor has no serious intention of encouraging people to save, because to do so would undermine the nature of the economy as it is today. He wants to encourage people to save like he wants a hole in the head. That is extremely dangerous for our future, which is why I want to detain the House very briefly on the new clauses. They relate to one of the most important aspects of the Bill, which is why I am so pleased that my hon. Friends decided to move them.

I remind the House of the savings climate in 1997, when the Government came to power. We had expanding tax-exempt special savings accounts and personal equity plans, which this Government re-branded as individual savings accounts. The intellectual climate was such that the Secretary of State with responsibility for such matters introduced "pension plus", which was designed to encourage a massive boost in savings throughout the country. I remind the Financial Secretary that in those days Britain had more savings through funded pensions than the whole of the rest of the European Union. Many more people owned TESSAs and PEPs than are saving in their equivalent today.

Savings have become ever more necessary for old age. People no longer retire at the age of 65 to a pair of slippers and entry into the ante-room of the afterlife. People now live and work for much longer than their parents and grandparents ever did. Of course, the old age of many who are retiring now is underpinned by defined benefit schemes—company pensions—that were built up in the good times. That is not the case today, as we all know so well.

The problem that we all face with our savings is immense. Although the Government are not wholly responsible for the scale of the problem, the £5 billion per annum raid on pension funds certainly has not helped, as my hon. Friend the Member for Hertford and Stortford said. It has wiped billions of pounds off the value of pension funds, and in the case of many companies it has been coupled with the demise of the defined benefit scheme, which benefited many people in their retirement. The stakeholder pension was a flop, and the pension credit scheme is stark raving bonkers. Under the terms of that scheme, some 80 per cent. of people will be dealt with through a means-tested approach. It has fundamentally undermined the savings—

Madam Deputy Speaker

Order. I hope that the hon. Gentleman will relate his remarks to the new clause under discussion.

Mr. Mitchell

I certainly will, Madam Deputy Speaker, but I just wanted to place the new clause in the context of the dire complacency that the Government have shown in all areas of saving.

When the Government came to power, TESSAs were a very important savings instrument. Through PEPs, one could save £12,000 per annum but, as the Financial Secretary said, this Government have reduced the savings level to £7,000 per annum. Now, it is being reduced to £5,000 per annum. What sort of signal does that send? As the Financial Secretary will doubtless appreciate, over recent years and in a falling stock market environment, the nature of ISAs has saved the Government tax, because capital gains losses have not been reclaimable from the Inland Revenue.

I remind the Financial Secretary of what the polls and industry have themselves said about the measures that she proposes to introduce. Research conducted by YouGov reveals that once the tax credit on dividends paid out by shares held in an equity ISA is withdrawn, almost half of all equity ISA investors will be less likely to invest in them. One in eight ISA investors say that they will probably not invest any more. Tony Vine-Lott, director general of the PEP and ISA Managers Association, said: ISAs have proved the most popular savings vehicle this Government has introduced, and now form a key part of day-today retirement savings for millions of people. To ensure the continued success of the ISA scheme, we urge the Chancellor to drop his plans to abolish the ISA dividend tax credit and the reduction in ISA subscription limits. Furthermore, the Skipton building society said that 80 per cent. of savers questioned think it wrong to cut the tax-free savings limits for cash mini-ISAs from April 2006. Some 45 per cent. said that that would put people off saving. Meanwhile, the Government want to promote stakeholder products and the child trust fund. TESSA customers said that the tax-free element of that account had been a big draw.

5.15 pm

Figures based on data retrieved from the Inland Revenue website covering the financial years from 1999—2000 to 2002—03 show that subscriptions to maxi-ISAs have declined by 40 per cent. Moreover, the average subscription has declined from £4,620 to £3,890—a fall of almost 16 per cent. Average subscriptions in mini-ISAs of stocks and shares—often used by the lower-income families about whom the Chancellor is so concerned—have fallen from £1,240 in 1999 to £1,070 in 2002.

Those figures should greatly distress the Government, given that, during the financial year 2000–01, 52 per cent. of mini-ISAs in stocks and shares were subscribed to by individuals with an income of £10,000 or less.

I urge the Financial Secretary to repent of this great mistake in the signals that she sends to people about the importance of saving. I urge her to say clearly what she hinted at, in a slightly backhanded way, in response to my hon. Friend the Member for Hertford and Stortford, and to make it clear that the Government have every intention of regularly increasing the level—rather than reducing it from £7,000—to send the clear signal that we need to increase the amount that we save throughout society.

If the Financial Secretary does not do that, when the Government's epitaph is finally written, the fact that they were asleep when this country faced a massive savings crisis will be towards the top of their charge sheet. She must think again and send a clear signal that far from reducing the levels of saving one can make through this device, she will increase them significantly.

Mr. Prisk

We have had a useful debate and my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell) has demonstrated his expertise on the subject.

The Minister's response, sadly, offered no hope to the ordinary saver. I note her remarks on Ofex and I hope that she will reflect on the points that have been raised. Many hon. Members will be disappointed by the Government's failure to realise that the halving of the savings ratio is storing up real problems for the future.

On tax limits, the measure may well have been temporary when it was introduced, but any self-respecting Government would have responded more effectively to the situation before them and not to their own bank balance. As for the abolition of tax credits, is it not peculiar, Madam Deputy Speaker, that a Labour Minister should proudly promote a policy that discriminates against basic rate taxpayers, and does so—not as I meekly suggested—for a £200 million benefit to the Treasury, but for £250 million? I hope that ordinary basic rate savers will know where their money has gone.

I said earlier that these were probing new clauses and I hope that where the Government and the Opposition stand has now been put on the record, so I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Forward to