Outlook: A tax-free way to stem the Revenue's losses

Here is a test. You are the new Chancellor and your Permanent Secretary has just helpfully pointed out that the tax-free investment alternative promised in your election manifesto will cost the Exchequer squillions. It was bad enough that the tax foregone on personal equity plans and Tessas will be pounds 1.25bn this year, rising to pounds 1.7bn by the turn of the century. But did you know that your brand spanking new Individual Savings Account, aimed at low income earners has the potential to cost a lot more in tax revenues than PEPs and Tessas ever did. Gulp. What do you do? The answer came yesterday, when the Treasury wheeled out a hapless Paymaster General, Geoffrey Robinson, to explain the Government's new ISA to a sceptical audience.

Yes, the ISA will enjoy virtually identical tax incentives to existing PEPs and Tessas plus bolt-on goodies like instant access to a portion of the amount saved. But there will be one major difference: unlike existing PEPs, which allow maximum investments of up to pounds 9,000 a year and no limit over time, the ISA will have an annual cap set at pounds 5,000 and an upper ceiling of pounds 50,000.

One of the admirable purposes of ISAs is to stimulate savings among a far wider swathe of people than PEPs and Tessas ever reached with their appeal to better-off folk with money to save.

There is no doubt that many will be better off with an ISA, even if it is to the tune of just a few pounds.But we should not pretend either that this is an exercise designed solely to encourage poorer savers since the fiscal impetus behind the new savings schemes is to cap the amount the Revenue is losing from existing ones.

While poorer savers will get a better deal it will not make a jot of difference to the super-rich. They, like Mr Robinson, will continue to invest their riches in offshore trusts where no Chancellor can get his hands on them.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
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.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower