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Mr. Loughton: Does my hon. Friend agree that the Government's proposal is in complete contrast to the message that we usually hear from Ministers? They claim repeatedly that they cannot commit a future Government to current measures. Therefore, there is no guarantee that this proposal will survive. What will happen in five years--

The First Deputy Chairman of Ways and Means (Mr. Michael J. Martin): Order. The hon. Gentleman must be brief.

Mr. Loughton: What will happen in five years if the Government decide that too much tax relief is lost? That is what they did in this case, and they tried to penalise PEP holders retrospectively until we objected.

Mr. Gibb: My hon. Friend makes a valid point. Labour right hon. and hon. Members have given commitments that have subsequently been breached. The Labour party

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gave a commitment during the election campaign that there would be no increases in taxation, yet, within two months of coming to power, Labour introduced measures that would raise £5 billion a year from the nation's pension funds. It is clear that the Government have decided to abolish the successful TESSAs and PEPs and replace them with the less successful ISAs for purely dogmatic reasons. That decision will return to haunt them in the future.

The Treasury Select Committee examined the 10-year guarantee, and its conclusions are quite damning. It makes the same point that my right hon. Friend the Member for Hitchen and Harpenden (Mr. Lilley) raises in the amendment. The report states:


It is there in black and white in the report of the Treasury Select Committee, which comprises a majority of Government Members. The report states that the total investment would be only £52,000 after 10 years. It sounds as though the members of the Treasury Select Committee agree with my right hon. Friend that this is a lifetime limit by the back door because the amount one can invest is limited to


    "only £52,000 after ten years".

Will the Paymaster General confirm that the Government do not intend to end the scheme after 10 years or to review it after seven years with the possibility of not continuing it after 10 years? If he provides that confirmation today, it will begin to redress the damage to savings that the Government have caused, and which they acknowledge in the declining savings ratio that is set out in a table in the Red Book.

The Treasury Select Committee raised another issue regarding the prize draw, to which my hon. Friend the Member for Sevenoaks (Mr. Fallon) referred. Footnote 75 on page xi of the Treasury Select Committee report states:


The Government have made another U-turn, sneaked out via a Budget press release and hidden in footnote 75 of the Treasury Select Committee's report.

Mr. Geoffrey Robinson: I find the Opposition's argument on this amendment bizarre. The Conservatives were in office for 18 years, and PEPs and TESSAs ran for much of that time. Every document relating to those schemes always stated clearly--although not always in bold or in headlines on the front cover--that tax rates and reliefs could change and that the investor should be aware of that fact. That degree of uncertainty existed. Indeed, the view was put around the City towards the fag end of their tired Administration that the Tories were looking seriously at ways of curtailing the cost of tax reliefs.

In this proposal, we are trying--I confirm to the Committee and to the right hon. Gentleman that the regulations will make it absolutely clear--to guarantee a minimum 10-year period in which tax reliefs will remain as they are now and cannot be reduced. That is an unprecedented guarantee for any Government to make. The Tories did not give similar assurances when they

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were in government. We give that guarantee in order to ensure certainty in the market, long-term stability and a genuine incentive to save. Our proposal has met with an extremely strong response during the consultation period.

Mr. Lilley: The Paymaster General says that the regulations--which are not before the Committee and which are not available to inspect--will guarantee no reduction in tax relief during a 10-year period. Is he then saying that, after five years, the tax relief available to basic rate taxpayers will be extended and will continue for a full 10 years? In that case, the previous announcement that relief would end after five years is no longer valid.

Mr. Robinson: We mean exactly what we have said: tax reliefs will remain at at least their present levels for a 10-year period and we shall review the scheme.

Mr. Lilley rose--

Mr. Robinson: I shall give way in a moment: I know the point that the right hon. Gentleman wants to make. What we have said is quite clear, and that is all we are saying: reliefs will last for 10 years and they will be reviewed after seven. The Government's commitment carries considerable weight because everyone knows that this Government will review the scheme in seven years. It is totally irrelevant whether the Opposition decide to join us in that commitment or threaten to change or withdraw the scheme and reduce the tax relief, because everyone knows that the Tories will not be in office to do that. Our position is quite clear. There is sourness on the part of the Opposition that the measure has been so well received by the financial savings institutions in the City of London.

Mr. Lilley: I am sorry that I did not make myself clear to the Paymaster General, but this is an important point. The Chancellor of the Exchequer said that the 10 per cent. tax credit for basic rate taxpayers taking out ISAs and investing in equities would disappear after five years; the Paymaster General has said that tax reliefs would remain unchanged for 10 years--which statement is true?

Mr. Robinson: We have made it clear that tax reliefs will be phased out after five years, and that remains the case.

I turn to some points raised by the hon. Member for Guildford (Mr. St. Aubyn), who was trying to be his usual helpful self but got into a terrible muddle. The proposals have been received extremely well. We are working for long-term stability. The clear commitment by existing institutions and by the new ones that want to join the scheme, such as Safeway and the other supermarkets, will ensure that we shall get new net savings.

There will not be the simple displacement factor to which the noble Lord Lawson referred when he introduced the scheme. He said, "This is not really about net increases in savings--we do not believe that--but it will increase the habit of investing in equities." That was the policy of the previous Government. Our policy is different: we want to generate genuine new savings. That is why we have no lock-in period and why we have guaranteed tax reliefs for 10 years, with a review after seven.

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It is unnecessary to go further than that at this stage. No Government have gone as far as that: the previous Government never gave a similar undertaking. All the documents relating to PEPs made it absolutely clear that tax reliefs could change and that people would have to guard against that. If the Opposition are minded to push their ridiculous proposition to a vote in this amendment, we shall have to resist it. In dividing the Committee, the Opposition would be going clearly against the wide acceptance of the stability of the long-term commitment that the Government's proposal represents, which has been so well received by the industry.

Mr. Hammond: How would the Minister square the projected decline in the savings ratio with the net increase in savings that he is talking about?

Mr. Robinson: We do not need any lectures from the Opposition about savings ratios or the mis-selling of pensions or savings products. The past masters in both were the Opposition. That is the point they must take on board. For four years in the 1980s, they managed to achieve a negative savings ratio. Billions of pounds--

Mr. Hammond: Check the figures.

Mr. Robinson: Absolutely. Check the figures. The hon. Gentleman will find that he is wrong. Indeed, he has been wrong already on one point, but he has not had the grace to admit it. The Opposition managed to achieve a negative savings ratio in the 1980s, and I shall send him the figures to prove it. We need no lectures on any of that from Opposition Members.

Everything that we have been doing--the Government have been committed to this approach and all our economic policies have been about this since we formed our Administration, including the operational independence of the Bank, the code of fiscal stability and the evening of the playing field on forms of investment--is designed to achieve long-term stability and long-term growth. That is best for savings, best for incomes and best for the country.

Amendment negatived.

Clause 75 ordered to stand part of the Bill.


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