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'which may (if the investor so wishes) be retained for the remainder of his life'.

One of the most significant proposals in the original plans that the Government announced for individual savings accounts was the one to introduce a lifetime limit of £50,000 as the maximum amount of tax-exempt savings that people could put into their replacements for PEPs and TESSAs. That was punitively low by comparison with the amount necessary to buy a modest pension. Indeed, I have already pointed out how small the amount is compared with what a long-serving Member of Parliament, such as the hon. Member for Bolsover(Mr. Skinner), who raised the issue, would be entitled to by way of a pension. To buy a pension equivalent to the hon. Gentleman's would cost about £350,000, so setting a limit of £50,000 for people's savings was a damaging threat.

It was especially offensive that the proposals came from the Paymaster General, who has such large amounts in tax-favoured forms in the Channel Islands. That is why

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there was such outrage in the country at the suggestion that this limit should be imposed. It was also wrong because it was unworkable in practice, in that following through people's ownership of ISAs over a lifetime would be very difficult; monitoring and maintaining the requisite records would have imposed a great cost on the providers. We are therefore glad that the £50,000 limit has gone.

The suspicion remains, however, that the Labour party would like to bring back the limit through the back door. The Government have promised to guarantee ISAs only for 10 years. In a possibly Freudian slip, the Paymaster General earlier today referred to people being allowed to invest £1,000 a year during the lifetime of the scheme. He clearly continues to think that there is to be a lifetime limit on investments in the scheme. The 10-year guaranteed life effectively means that people can put £5,000 a year aside for 10 years: we are back at the £50,000 lifetime limit, by the back door.

Our suspicions are fuelled by the fact that the Government refused to put their so-called guarantee in legislation. Nowhere in the Bill is there to be found any assurance to those who take out ISAs that they will be able to keep them for any period, let alone 10 years. We believe that a period of 10 years is grossly inadequate. People want to be sure that, when they put money in such schemes, they can keep them for the rest of their lives. They are saving, by and large, for retirement. They do not want their tax exemptions to disappear after 10 years.

We have therefore specified in this important amendment that, not just for 10 years but for the rest of their lives, people will be able to keep the ISAs that they have taken out. We should be interested to hear from the Paymaster General any reasons he has for opposing the amendment. We will look closely at his words, as we look suspiciously at his Freudian slip earlier today, to see whether the Government are suggesting that there should be some limit on the duration of the rather minimal tax reliefs available under the legislation that they propose.

Mr. St. Aubyn: I support amendment No. 6. No one who saw the success of PEPs and TESSAs would honestly claim that there was a good case for changing a successful system. I am not a keen supporter of ISAs, because they are second best. We had a thoroughly good scheme before. If we are to have ISAs, however, let the Opposition's success in arguing for the lifting of the cap on ISAs be written into the Bill, as my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) urged.

It is extraordinary how much power the Bill leaves to the discretion of the Treasury. In so many of the areas touched by the Bill, the Government want to keep all their cards up their sleeve. That is characteristic of this Government in so many aspects of their policy. Now we see it in their Treasury policy.

There are only two reasons for rejecting the amendment. The first is that the Government wish to preserve the cap of £50,000 by the back door. The second is that they want to keep to themselves as much discretion and power as possible, and leave as little as they must for debate and scrutiny in the House of Commons.

Amendment No. 6 would encourage people's wider aspirations. We have heard the Government argue that the point of ISAs is to redirect savings incentives to those on lower incomes. We must all encourage those on lower

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incomes to save, but, if they have very little discretionary money available for saving, the amount that we can encourage them to save through a discretionary scheme will be limited.

If the Government want those on lower incomes to save more--for example, to provide more for their own needs in the future, particularly for their retirement needs--the Government should be honest and set out their proposals for a more rigorous and disciplined system for people to save for the long term. They would thereby make it clear that they want people to save for their future needs, not just for their future aspirations--additional spending opportunities over and above their needs.

That is why most people would put money into ISAs, as they put money into PEPs and TESSAs. They put the money in because they did not need it immediately. In many cases, they did not need to save all the money, but they saw that, by saving it through that mechanism rather than spending it immediately, they might have wider spending opportunities. They might be saving towards a daughter's wedding, a world cruise on their retirement or a second honeymoon. Such were the objectives of many people who put large sums into PEPs and TESSAs.

Now the Government are changing the nature of the scheme and encouraging those on much lower incomes to get involved, but they cavil at the suggestion that people should put in more than £50,000. They do not want to give even that encouragement. They do not want people to venture even that far in their hopes and aspirations. It says a great deal about the Government that they are not prepared to make such a commitment.

Mr. Gardiner: I had no intention of speaking on the amendment, but I feel compelled to do so because of the cavalier way in which the Opposition insist on confusing a guarantee with a manacle. It is clear that the Chancellor has offered a guarantee that the scheme will continue for at least 10 years, because the Government appreciate the need to give long-term security to investors. It is to be welcomed, especially as it far exceeds any guarantee on PEPs made by the Conservatives when in government.

Mr. St. Aubyn: Is not the difference between the present Government and the previous one that the previous Government did not break the promises and undertakings they made before an election, in the context of PEPs and TESSAs? Because the Government sought to break their word, they must now give more cast-iron guarantees.

Mr. Gardiner: I am delighted to respond to that question. It is breathtaking to be lectured by the Opposition on a Government breaking their word. The Conservatives were indicted year on year for breaking their word in government, particularly their tax pledges. The categorical pledges on VAT made before the general election in 1992 were consigned to the waste paper bin within weeks afterwards. We will take no lectures on that. On clause 75, it is clear that the Chancellor sought to give some long-term security to investors who might be induced to come into ISAs. That was not previously done.

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No Government would seek to manacle themselves in terms of tax for an indefinite period. That period might be as long as 70 years.

Mr. Gibb: The Government have caused enormous damage to the confidence of savers. The first colossal damage was done in the July Budget, when the Government decided to abolish the repayment of dividend tax credits. That took £5 billion a year out of the nation's pension funds and dented people's confidence in pension funds as a vehicle for savings. It dented the concept of savings. The Government then decided to announce the abolition of PEPs and TESSAs during the Finance Bill discussions in July and the months that followed. That, too, damaged people's confidence in savings. The nonsense of the initial proposals for the £50,000 limit added to the lack of confidence in the savings tax regime. It is odd that the Chancellor feels the need to guarantee the survival of the ISA scheme for 10 years. When the Conservative Government introduced PEPs and TESSAs, they announced no such guarantee. Nobody believed that it was necessary to specify the length of the reliefs provided, because everyone assumed that they would last indefinitely. The purpose of those schemes was to encourage people to save for the long term, and those schemes were enormously successful.

Mr. Hammond: Does my hon. Friend agree that the difference is that people believed that the last Government were genuinely committed to the principle of encouraging long-term savings, whereas they believe that this Government have merely embarked on a cosmetic exercise?

8.30 pm

Mr. Gibb:

My hon. Friend makes a very valid point.I have asked myself why the Government have decided to abolish TESSAs and PEPs and replace them with ISAs, which are a pale facsimile. Why did the Government not simply tinker with TESSAs and PEPs? The only possible reason is that the Government want to be rid of a successful, Conservative-inspired policy for purely vindictive, political reasons.


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