§ Mr. Liddell-GraingerTo ask the Chancellor of the Exchequer what assessment he has made of the effect of the removal of advanced dividend tax credit on levels of household saving. [186542]
§ Ruth KellyI believe the hon. Gentleman is referring to the removal of payable tax credits on dividends. This was one element of a package of measures, including lower corporation tax rates and increased capital allowances, designed to encourage investment and economic growth. Therefore it would be misleading to assess the impact of one measure in isolation.
Furthermore, the Government has introduced a number of measures to encourage saving since 1999, such as reducing the rate of tax on dividends from 20 per cent. to 10 per cent. for starting and basic rate taxpayers; introducing the lower rate of tax for savings of 10 per cent. and the Individual Savings Account. The ISA has been very successful, with around 15 million savers—one in three adults—subscribing around £140 billion into their ISAs since they came into effect in April 1999.
§ Mr. Liddell-GraingerTo ask the Chancellor of the Exchequer what assessment he has made of the effect of reducing the maximum investment limits on Individual Savings Accounts on household saving. [186543]
§ Ruth KellyISAs form one part of the Governments approach to savings linking with policies such as the new Child Trust Fund, reductions in the tax on Capital Gains for business assets from 40 per cent. to 10 per cent. and radical simplification of pensions with a lifetime limit of £1.5m.
A reduction from £7,000 to £5,000 a year may affect the allocation of savings between savings products for those currently investing more than £5,000 a year in an ISA. The overall effect on such savers behaviour is uncertain. We shall continue to keep the approach to savings policy under review.