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The Second Deputy Chairman: Order. The hon. Gentleman is an hon. Gentleman and the hon. Lady is an hon. Lady.

Mr. Loughton: I meant no disrespect--I do apologise to the hon. Lady and to you, Mr. Lord.

Earlier, I was asking what benchmarking is all about. We have no clear definition at all, which could lead to a false sense of security among the 6 million-strong army of virgin investors on whom the scheme is targeted. In a letter to the Independent Financial Advisers Association, the Treasury stated that ISAs were about encouraging ethnic minorities, families on low income and women to save. On that basis, is the benchmark to be based on the "Woman's Own" seal of approval, or on the endorsement of the Commission for Racial Equality? We simply do not know.

ISAs must succeed--we must get them right. We should by now have cleared up all those important questions, of which the largest and most worrying is that of benchmarking. If that is not resolved, it could result in the biggest ever misbuying scandal. Time is ticking away, yet, even at the Committee stage of the Bill, we do not have the consultation documents or some of the proposals on the mechanics of ISAs and how they are to work, and the ISAs themselves are still too complicated.

Mr. Nick St. Aubyn (Guildford): I am grateful to my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) for carrying out such an effective demolition job on ISAs, because that will save me from having to repeat a number of points. However, I have several points I wish to make.

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Drawing on my hon. Friend's point, the capital gains benefit for small savers simply does not exist within ISAs, nor does the income tax benefit. The Government have already knocked that away with their changes to the system of corporation tax. There is not only a new pensions tax, but a new ISAs tax, in that distributions by companies will already have suffered corporation tax and there will be no offsetting credit. It is contradictory for the Government to claim that what is primarily an equity investment vehicle will be attractive to lower rate taxpayers and, at the same time, to say that they have made the changes to corporation tax in order to encourage companies not to make distributions and to invest the money in the company for capital gain instead.

The Second Deputy Chairman: Order. I have to remind the hon. Gentleman quite firmly that the amendments before the Committee are tightly drawn and he must direct his remarks to them.

Mr. St. Aubyn: What I am coming to is that the amendments propose to relax the rules relating to ISAs, so that small-scale savers, for example, are not obliged to invest in equities, but can invest most of their ISA in interest-bearing accounts, where they can at least gain the full income tax benefit without the offset of corporation tax.

Ms Keeble: The hon. Gentleman says that the amendment would relax the rules so that people could put more money into interest-bearing savings accounts, yet the amendment applies only to savers over the age of 55. What he is saying is not borne out by the amendment, because that would impose a restriction on ISAs and not relax the rules.

7.45 pm

Mr. St. Aubyn: The whole system of ISAs is flawed, because the Government are yet again changing the rules and making saving more complicated. That alone will deter investment by the very people whom the Government claim they want to encourage to save--the 6 million so-called potential savers.

The Financial Secretary is mistaken to think that the fact that PEPs and TESSAs give most advantage to relatively well-off people somehow goes against the interests of the less well-off. When people in this country save, it is to the benefit of the entire economy; when people save, it is to the benefit of the overall level of investment in our economy. The reason why the Opposition oppose the Government's measures is that they discourage saving in many ways--we see that in the Red Book projections--and discourage investment.

The Government claim that they want small savers to save money, but, by their policies, they cannot even save such people's jobs because we are on the threshold of a recession in manufacturing. It is unrealistic of the Government to think that those who have no spare cash will start to save discretionary sums, not only in deposit accounts, but in higher risk equities. That is simply to misunderstand the needs and aspirations of the very group of people whom they claim to represent. They do not do so. At least the amendments will increase the flexibility of the ISA scheme, so that those who aspire to participate

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in it will know that it is slightly more open ended than the Government intend. That is why I support the amendments.

Mr. Gibb: I rise again to correct something I said earlier when speaking to amendment No. 8. I referred to Gavyn Davies, whereas I meant to refer to Andrew Dilnot, which puts a completely different complexion on my remarks--indeed, some might argue that it adds credibility to my remarks, given that Andrew Dilnot is director of the Institute for Fiscal Studies. In his evidence to the Treasury Select Committee in March, he made some powerful points and was quite damning of the Government's proposals. He said:

While I am on my feet, I should mention that the Institute of Chartered Accountants is of the same opinion, believing that the new regime of ISAs and the costs that will be borne by those taking out an ISA are completely unnecessary. The Institute of Chartered Accountants says:

    "It is our conclusion that it would be more straightforward to amend the existing PEP and TESSA savings schemes rather than introduce a wholly new scheme, particularly as the proposed ISA does not appear to offer improved savings incentives, and in fact may well discourage many individuals from saving."

Mr. Geoffrey Robinson: As you said, Mr. Lord, the amendments are tightly drawn. However, our debate has been slightly wider. In effect, amendment No. 5 is a paving amendment, leading into amendment No. 7, which would allow those aged over 55 to invest more than £1,000, during the lifetime of the scheme, in cash. One might equally argue that younger people should be encouraged in that direction, but to argue in favour of the amendment, as the right hon. Member for Hitchin and Harpenden (Mr. Lilley) did, is to misunderstand what the revised savings scheme is about.

Surprisingly, the hon. Member for East Worthing and Shoreham (Mr. Loughton) says that he has parliamentary written answers in which we say that the new scheme will cost more than the previous PEPs and TESSAs regime.I should like to see them. I shall hasten to be corrected if I am wrong, but I believe that we said in the Budget and in the Red Book--the Red Book figures show this to be the case--that, in the first year, the new scheme would cost the same as the previous scheme, then it would cost plus £30 million, then minus £30 million, giving broadly the same cost in terms of tax relief for the new system as for the old system. [Interruption.] I shall give the hon. Member for Sevenoaks (Mr. Fallon) the page reference if he needs it. I do not recollect--although I stand to be corrected--that we have ever said that the cost would be any more than that.

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The entire effort of the new scheme is directed at re-balancing the tax relief to encourage the half of the population who have, and make, no savings at all to save. Although the hon. Member for Guildford (Mr. St. Aubyn) may think it derisory, it is a worthy aim, and it has found widespread support. We should not be as pessimistic as he is about its eventual success. I believe that the Conservatives cannot bear the tremendous welcome that the revised proposals are receiving. They cannot bear the fact that we have consulted and that we have such a wide measure of support for our present proposals.

My hon. Friend the Financial Secretary received from Lloyds bank a rather good document, entitled "The new Individual Savings Account (ISA)", because she happens to hold a present PEP--I am proud that she does. It says:

I would try your patience, Mr. Lord, if I were to quote the many welcomes that our revised proposals have received. None of those people has come to us with the bizarre proposals that we have received from the official Opposition.

Mr. Loughton: I do not want to be flippant; I just wonder what advice the Paymaster General has received from his own bank, whether he has a PEP and whether he will take out an ISA.

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