James Daley: Osborne's green ISA is just a gimmick
Saturday 01 March 2008
Shadow chancellor George Osborne finally came up with his first piece of savings policy this week – some two and a half years after he took responsibility for the Tory party's Treasury brief. His big idea is the creation of a Green ISA (Gisa), a tax-free savings vehicle which would encourage private investors to put their money into environmentally friendly companies.
At first glance, it all seems relatively sensible – tackling two serious issues in one blow. The importance of cutting carbon emissions is well documented, not least by this newspaper, and any additional incentive for companies to take a more environmentally conscious approach to business should be welcomed.
Secondly, the financial services industry has been moaning for years that ISA limits are too low, and have not been increased even once in the nine years since they were created by Gordon Brown.
Although the limits are finally set to rise next month, it will only be by £200 – from £7,000 to £7,200 – which is equivalent to an increase of just over 0.3 per cent a year since their creation in 1998. Some would argue that it's no coincidence that British savings rates have drifted to a 50-year low recently.
Osborne's Gisa (will that be pronounced "gysa" or "giza"?) would be separate to a regular ISA, so any allowance would be additional to the current £7,000 annual ISA limit.
If you happen to be lucky enough to breach the £9,200 capital gains allowance that you're given by the taxman each year, you currently get taxed at 40 per cent on the rest (although this will reduce to 18 per cent, as of April). For those who have made use of their full allowance every year, the tax savings in an ISA can be enormous, so any extension – even in the form of a Green ISA – would surely be popular with more affluent savers.
The problem with Osborne's Gisa, however, is that devising a credible and understandable framework for it will be no easy job. For a start, where exactly do you draw the line between which companies investors can and can't put their money in? Although Osborne talks about awarding green kitemarks to businesses who have lowered their carbon emissions – using the likes of Marks & Spencer, BSkyB and GlaxoSmithkline as model examples – such a scheme will be very difficult to put into practice.
Do you rule out the whole of the energy industry, for example, or just award kitemarks to those who have lower emissions than the average? BP may be doing all it can to develop renewable energy sources, but it's still one of the biggest oil producers and continues to explore and develop new wells. If you can hold it in your Gisa, you may be supporting renewable energy to some extent, but your savings will also be propping up a major polluter. If you exclude the energy industry entirely, however, you are missing an opportunity to offer the biggest polluters an incentive to be more environmentally conscious.
Whichever way it's split, the scheme will end up angering some powerful businesses – not typically the Tories' style.
I also wonder whether Osborne's plan is really what's required to help get the savings ratio up. Those who are concerned about the £7,000 a year ISA limit being too low, are probably not, in all honesty, the people we need to be worrying about. However, many more people are restricted by the £3,000 annual limit on cash ISAs (which rises to £3,600 in April) – yet this would not be affected by Osborne's Gisa plans.
Although Osborne may have good intentions, I can't help feeling that the Gisa would end up failing on both counts – having little effect on reducing carbon emissions and no impact on increasing savings rates. Nice try though George.
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Weekly Money: Round-up of the personal finance stories you may have missed 19-23 January
Bargain Hunter: From The Outsider to 1984, catch a cut-price classic, read it in the rye
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Money Insider: Smart alternatives to the pensioner bond
- 1 Rowan Atkinson to sell £10 million McLaren 'supercar' he crashed into a tree and a lamppost
- 2 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 3 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 4 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 5 Men behaving badly: Urinating while standing, 'manspreading' and the gendering of selfishness
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village