ISAs won't benefit the poor

Call me an old-fashioned lefty if you must, but I've always been in favour of wealth redistribution. The idea that the better-off in society should help out the less fortunate appeals to me.

So why is it that when I heard Geoffrey Robinson, the Government's Paymaster General, saying the Individual Savings Account (ISA) will "benefit the many, not the few", I reached for the bucket?

Proposals for the ISA were announced this week at a fractious press conference, in which Mr Robinson attempted to justify the pounds 50,000 lifetime cap on tax-free savings into the new account.

It wasn't just the sight of Labour's richest minister, one apparently skilled in the black art of tax avoidance, telling me about ISAs which had me gagging. It was the assumption that we would buy the Government's line.

This was the claim that its proposals would hit only a tiny minority of the really wealthy, those with pounds 50,000 or more held in PEPs and Tessas by April 1999.

Now, of course, wealth is relative. If you are unemployed, pounds 50,000 is one heck of a lot of money.

But for many hundreds of thousands of people, this is simply the amount they have accumulated over the years in the hope that it will help them when they retire.

They are the ones who will be hit by the ISA proposals, not the super- rich, people like Mr Robinson, who will always find ways of dodging taxes on their assets.

I can already hear plaintive questions: "But what about the worse off? Won't they benefit from the ISA?"

Again, benefits are relative. Yes, millions will potentially benefit. If you are saving money in a building society account, placing it into an ISA instead will earn you more. The ISA will mean banks and building societies offering tax-free savings accounts into which millions of people will transfer up to pounds 1,000 a year.Then again, most lower-paid people could never afford to save even a fraction of that amount.

Moreover, the annual cash limit of pounds 1,000 into ISAs is important. It suggests that the Government has another purpose. It is that of capping the amount of tax foregone on savings schemes by the Inland Revenue to an annual limit of pounds 1.5bn or thereabouts.

As for encouraging more people to save, I don't buy a word of it. Imagine the scene. You are at the Tesco checkout and in your hand you have the pounds 5 change from your weekly shop. To the left is the ISA desk, where you are in with a chance to take part in a lottery that will win 50 people a prize of pounds 1,000 each month. To the right is the National Lottery till, where you are in with a chance of pounds 5m or pounds 10m. Even a supposedly serious personal finance editor such as myself can guess which way most of us will turn.

The reality is that the ISA is a shabby way of taxing a swathe of hapless individuals who made the mistake of taking at its word a previous government's tax pledges.

Most people who have invested in PEPs and Tessas in the past 10 years are middle class. They aspire to a better future and are prepared to make sacrifices. Their "bargain", if that's the right word, would have meant setting aside more money over 20 or 30 years in order to reach their financial goals.

We may be scornful of their propensity to save, even jealous of the higher earnings that have allowed them to do so. But we should also feel contempt for a Government which uses class war language to justify extra taxes on them, when the richest and most powerful people in our society will, as always, get off scot-free.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people
Sport
FootballGerman sparks three goals in four minutes at favourite No 10 role
News
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Sport
A long jumper competes in the 80-to-84-year-old age division at the 2007 World Masters Championships
athletics
PROMOTED VIDEO
Sport
Radamel Falcao was forced to withdraw from the World Cup after undergoing surgery
premier leagueExclusive: Reds have agreement with Monaco
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Life and Style
Walking tall: unlike some, Donatella Versace showed a strong and vibrant collection
fashionAlexander Fury on the staid Italian clothing industry
Arts and Entertainment
Gregory Porter learnt about his father’s voice at his funeral
music
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Life and Style
Children at the Leytonstone branch of the Homeless Children's Aid and Adoption Society tuck into their harvest festival gifts, in October 1936
food + drinkThe harvest festival is back, but forget cans of tuna and packets of instant mash
Sport
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
New Articles
i100
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam