Cameron calls for tax cuts on savings

Published on Monday 5 January 2009 14:37

Conservative leader David Cameron called today for the abolition of income tax on savings by basic-rate taxpayers.

And he said that pensioners' tax allowances should be raised by 2,000.

Mr Cameron said the Government could introduce the changes in its spring Budget, covering the estimated 5 billion cost by cutting back on state spending in 2009/10.

The Tory leader said the proposals formed part of the vision for a "good future" for Britain which his party will put forward at the next general election.

Mr Cameron also launched Conservative reports on measures to build the UK's 5% share in the growing market for environmentally-friendly technology, which he said provided "a roadmap of how Britain can be the world leader in green goods, services and companies".

He said that a Conservative government would do everything possible to ensure that the majority of the population has access to high-speed broadband links within five years, with universal access in a decade.

In a speech on the economy in London, Mr Cameron denounced the Government's response to the downturn as "economically stupid and morally indefensible" because it encouraged debt and undermined saving.

"It is economically stupid because it keeps the debt crisis going, so everyone from individual families to the Government to the whole economy continues to be dependent on foreign-financed debt," said Mr Cameron.

"And it is morally indefensible because it punishes future generations –and responsible savers in this generation – for the irresponsibility of others."

His measures to encourage saving could be achieved without affecting spending plans for the NHS, schools, defence or international development by restricting other Whitehall departments to a 1% real-terms increase, he said.

They would encourage the "really big change" required to transform Britain "from a spend, spend, spend society into a save, save, save society", he said.

The Conservative plans would increase a pensioner's annual tax-free income allowance to around 11,000 – from the current 9,030 for 65-74-year-olds and 9,180 for over-75s.

The scheme would be worth up to 400 a year to pensioners with income from savings, who have seen their personal budgets hit by successive cuts in interest rates from the Bank of England.

It comes days ahead of a meeting at which the Bank is expected to reduce the base rate by as much as a percentage point from its current low of 2%.

In recent weeks, high street banks have slashed the interest paid on some popular accounts to as little as 0.1%.

Mr Cameron said the Government's policy of increasing state borrowing to stimulate the economy was making Britain's problems worse. He denounced the temporary 2.5% cut in VAT as "an absolutely criminal waste of money".

He repeated his call for an early election this year, saying: "The longer they're in, the worse it gets. Labour are part of the problem, not part of the solution."

And he echoed US president-elect Barack Obama by promising: "Change is going to come – I hope it's sooner rather than later, but change is going to come."

Mr Cameron turned Mr Brown's "do nothing" jibe at the Tories back against Labour, accusing the Government of failing to respond to Conservative proposals for a 50 billion national loans guarantee scheme.

"Just what is this great economic mobilisation the Prime Minister keeps talking about?" he asked. "As far as I can see, unemployment's going up, repossessions are going up and the economy's going down, with nothing Labour are doing making much difference...

"Gordon Brown's policies for the recession are not working. The recession is getting worse not better.

"Instead of Labour doing nothing effective, they should take up our idea of a self-financing National Loan Guarantee Scheme to help businesses get through these tough times and help keep people in work."

Labour promised a "grim" future of 1970s-style big government, tax rises and a continued debt bubble, said Mr Cameron.

By contrast, Tories were offering a "good future" where the state and citizens would "live within their means, save for a rainy day, waste not and want not".

He insisted he had not ditched his ambitions for a greener and more family-friendly society in the face of the economic crisis, arguing that the Tory vision was for standards of living and quality of life to rise together.

"Our vision of a good future is of a less materialistic country, more concerned with people and our relationships; a contributor society not a consumer society," said Mr Cameron.

The TaxPayers' Alliance pressure group welcomed the Tory proposals.

Chief executive Matthew Elliott said: "Abolishing tax on savings would be a huge help to millions of people who are struggling to make ends meet.

"Savers have done the right thing by setting money aside for a rainy day or their retirement, so there is no way they should be punished with taxes. The Bank of England was right to cut interest rates to help borrowers, but now the Government must help savers out too."

But Labour launched a dossier accusing the Tories of doing nothing to help tackle the global economic challenges.

Chief Secretary to the Treasury Yvette Cooper said: "David Cameron is making empty promises to hide the fact that the Conservatives would do nothing to help the British economy, and once again would turn their backs on the British people in difficult times.

"The cruellest of his empty promises is a loans scheme to business when he also rules out providing the money to fund it.

"The fact is every economy in the world will face real challenges in 2009. That's why it's so important to provide British families and businesses with real help to get through the downturn sooner and stronger.

"Labour is determined to provide real help – including the VAT cut which will save households on average 275 a year, and 60 for every pensioner this month – all opposed by David Cameron.

"David Cameron talks about the 1970s. The truth is the Conservatives are returning to the worst of Thatcherism in the early 80s, with no support for jobs or the economy and cuts in public services as well.

"The Conservatives are repeating their mistakes of the past: if a timely fiscal stimulus of similar scale had been applied at the beginning of the 1990s recession, around 300,000 fewer jobs might have been lost."