IT WAS good to see Interactive Investor (iii) giving Gordon Brown a hard time about Isas this week - a campaign which has lost most of its steam since the Treasury gave some concessions in its pre-budget report in December.

In a letter to the Chancellor, iii points out that, in spite of a welcome commitment to keep the annual Isa limits at pounds 3,000 for cash, and pounds 7,000 for stocks and shares, the Treasury is still providing no incentive for those on lower incomes to invest in equities.

Scrapping the dividend tax credit last year has ensured that equity Isas are now really only a tax-planning tool for the middle classes.

Tax breaks should, of course, not be the main reason for putting your money in the market, but it's amazing how much difference a small incentive can make. The cost to the Government would also be marginal.

Ten years ago, investors could save some pounds 12,000 a year tax-free - and the dividend tax credit ensured that the tax breaks were worth it, even for savers on the lowest incomes. But during the past eight years, pounds 12,000 has been reduced to just pounds 7,000 - and the Treasury won't even commit to that for any more than another four years.

Such directionless policy-making has helped half the savings ratio since New Labour came to power, and sends all the wrong messages to investors at a time when the Government needs, more than ever, to establish a strong savings culture in the UK.

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