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Mr. Gibb: On a point of order, Mr. Lord. During the debate on amendment No. 2, the hon. Member for Dudley, North (Mr. Cranston) referred to some statutory instruments relating to clause 30 that he said the Government had already published and placed inthe Library, and I believe that that was confirmed by the Paymaster General. I asked Library staff for the reference number of the draft regulations; they can trace no sign of any such regulations being published on Friday, and there is no mention of them in the list of draft regulations or on today's Order Paper. Is not it a gross discourtesy to the Committee that the regulations were not published before the debate, and is not something odd going on, when Labour Back Benchers can see them before other hon. Members?

The Second Deputy Chairman: I was not in the Chair when those exchanges took place, but I have no doubt

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that Ministers will have heard the point of order. If the documents ought to be in the Library and are not, I assume that Ministers will take the appropriate action.

Mr. Geoffrey Robinson: Further to that point of order, Mr. Lord. I hope that the hon. Gentleman asked for the right things when he went to the Library.

Mr. Gibb: Yes.

Mr. Robinson: If that is the case, we are at a loss at the moment, but we will seek to rectify any error as quickly as possible.

Clause 75

Use of PEPs powers to provide for accounts

Mr. Lilley: I beg to move amendment No. 5, in page 60, line 30, leave out 'subsection' and insert 'subsections'.

The Second Deputy Chairman: With this, it will be convenient to discuss the following amendments: No. 7, in page 60, line 36, at end insert--

'(1B) The regulations to be made under this section shall provide that investors over the age of 55 shall not be restricted, within the overall annual contribution limits, in the amount that they may choose to invest in the form of--
(a) cash, or
(b) life insurance.'.

No. 8, in page 60, line 36, at end insert--

'(1C) The regulations to be made under this section shall provide that the charges made for administering an account such as is described in subsection (1A) above shall be no greater than the average charge made for administering a PEP in financial year 1998-99, such average to be calculated by the Treasury.'.

Mr. Lilley: The original plans for individual savings accounts were not only badly thought out but wrong in principle. The original proposals revealed Labour's true intentions on private savings. Labour wanted to tax prudent savers, in effect retrospectively: those who had saved most prudently would face higher tax.

We forced a U-turn on the issue. In a debate some weeks before the Budget, we won the argument, even though we could not win the vote, and the dismay on the faces of Labour Back Benchers was clear when Ministers were unable to put up any coherent defence of the proposals. We welcome the U-turn, humiliating though it may be for the Government.

Unfortunately, the damage has in part been done, because, by publishing their intention to introduce retrospective changes in the taxation of savings vehicles already in existence and savings already accumulated, the Government have made people concerned that, at some future date, a Labour Government might behave in a similar fashion, when they think that they can get away with it. That has increased reluctance to save in the relevant forms. That is doubtless part of the reason for the decline in the savings ratio that is forecast in the Red Book.

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Labour originally wanted to reduce the annual amount that people could save in tax-advantaged forms. Alas, that aspect remains in the revised proposals announced in the Budget and in the Bill. The maximum of £10,800 a year of tax-exempt savings will be reduced to only £5,000 a year.

That is especially onerous on those approaching retirement. If they have not made sufficient provision earlier in their life, they will not get the benefits of compound interest that enable people to save lesser sums. Having fewer years to go, they may need to put more money aside. We should prefer a higher amount to be permitted to savers in, say, the last 10 years of their working life.

Thinking that the Government were unlikely to respond to such a sensible measure, which breaks the very principle to which they are wedded, we have made, in amendment No. 7, a suggestion that came originally from Saga, which caters specifically for the over-50s and over-55s, to allow people in that age group greater flexibility on how they deploy their investments, within the £5,000 limit, so that they can do so in less risky ways if they feel that to be appropriate as they approach retirement and have less chance to ride out the ups and downs of the stock market over a longer period.

The Government also wanted to cut the incentives. The cut in the July Budget remains, alas, in the current proposals. Under our Conservative tax system for people saving in personal equity plans, for every £80 net dividend, people got a £20 tax credit, whether they were non-taxpayers or basic rate taxpayers. Under the Government's scheme, the non-taxpayers--those with the lowest incomes--will get no tax credit at all. That will penalise the least well-off relative to the tax regime that we used to have. I will be interested to see whether any Government Members stand up and defend that.

Instead of getting £20 tax credit for every £80 of net dividend, basic rate taxpayers will get only £8.90, and that credit will disappear entirely after five years. The main beneficiaries from investing in equities in individual savings accounts will be top rate taxpayers. Is that what the Labour party envisaged when it was elected? Did it expect Ministers to introduce a scheme in which the primary benefits fall to top rate taxpayers and which limits any tax benefit to those on the lowest incomes and more than halves the benefit to basic rate taxpayers? Unfortunately, the costs of the scheme will absorb most of the tax benefit for basic rate taxpayers. The fourth characteristic of the Government's proposals was that they were reckless about the costs of schemes. The £50,000 lifetime limit would have had the most adverse consequence on providers of savings vehicles, and we are delighted that, at least on the face of it, that has disappeared.

Other complex rules persist and the sheer change in the rules from the previous system will require all suppliers to modify their systems--and incur costs in so doing. That will enhance costs and mean that a basic rate taxpayer with a modest tax credit will find much of the credit is absorbed by the extra costs imposed by that unnecessary change, unless the provider absorbs the costs; unit and investment trust providers sometimes do so.

Our amendments would deal with some of those problems, but, alas, many of the problems inherent in the changes that the Government announced in November or

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early December persist in the proposals in the Bill. We can only hope that the Government will be willing to make further changes in addition to the massive changes that they have already been forced to make in response to our arguments and widespread criticisms from the financial and savings community.

Mr. Gibb: Despite all the changes that the Government have made in ending the absurdity of a lifetime limit, perhaps the Paymaster General could tell us the advantages for a basic rate taxpayer of holding equities through an individual savings account, given that any capital gains are likely to absorb his capital gains annual allowance anyway and it is unlikely that such a taxpayer would be able to generate in a normal, average year gains exceeding the annual limit. The 10 per cent. tax credit over five years is unlikely to exceed any charges made by a managed fund scheme, so what are the advantages of a basic rate taxpayer holding equities through an ISA?

If there are no advantages, how can the Government claim that introducing the ISA is any great advance on the TESSA and PEPs regime that already existed? Many outside commentators, including Gavyn Davies, I think--I will stand corrected if I am wrong--have said that all the Government's objectives could have been achieved by simple changes to TESSAs, for example, by removing the ending of the five-year, locked-in period.

The Institute of Directors said of the regime:

Will the £5,000 limit be increased to reflect inflation as years go by, or will it stay at £5,000 and thus diminish over time as inflation eats away the value of that figure? Will the Minister confirm which of those two options the Government will pursue?

The main criticism by the Institute of Directors again concerns how the legislation has been put before the House. It said:

Perhaps the Paymaster General will respond to those points.

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