Money Talk: Sort it all out, Mr Brown

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The Independent Online
Tuesday sees the third Budget in a year - sort of. The idea behind next week's "green" or draft statement seems to be to kick off the debate on what should be in the proper Budget next spring. But it is by no means clear - not least because this is the first 'Budget' of its kind - how comprehensive a look Chancellor Gordon Brown will take at the world of personal tax breaks.

Certainly savers should be wary of the often self-interested exhortations of financial advisers to "buy now" in case any removal of tax breaks in the Budget proper might be backdated.

On the bigger picture, a possible 10 per cent income tax band has been trailed, and the savings tax tipsters' favourites are for proposals for changes in capital gains and inheritance taxes. With the former, the fear is of a tax clampdown on short-term "speculative" gains (which might even hit windfalls); with the latter, it is of a general clampdown on a regime that on one view is so permissive that it has been dubbed a "voluntary tax".

But my real hope for next week's Budget statement is that the Chancellor will take the chance to reimpose some stability for savers. The Government, for all its presumed commitment to encouraging individuals to save, has been less than helpful.

Labour's first Budget in the summer talked of introducing Individual Savings Accounts (ISAs) in 1999, but we still don't know what will happen to PEPs and Tessas from then. Likewise, the Government's review of the pensions framework has raised questions on just about every aspect of pension provision, but left us with few solid commitments.

Investors simply don't know whether taking out a PEP is still a good idea. Equally, with the holy grail of low-cost stakeholder pensions held out and no certainty that the Government won't take another bite out of the tax breaks of existing pension savings, people finally getting round to sorting out a pension might reasonably ask whether they wouldn't be better off waiting a bit longer.

On ISAs, it is thought some type of announcement is imminent. But even this is expected after next week's statement.

Sure, it is important the Government takes enough time to get things right, and final proposals may in some cases be held back by the effect on, and resolution of, other savings questions. But these issues should be sorted out quickly. Stability and certainty are vital for saving, and if people are put off saving they will spend. Which can hardly be good news for inflation, stirrings of which have sparked a series of interest rate hikes since Labour came to power.

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