Riddle of Liddell's savings pledge
Sunday 27 July 1997
Goaded by a question from Nick Gibb, the new Conservative MP for Bognor Regis and Littlehampton and former tax accountant, Ms Liddell promised that the Government's new individual savings accounts (ISAs) "will certainly be as attractive" as the existing Tessas and PEPs which ISAs will replace in 1999.
The puzzle, says Mr Gibb, is how Ms Liddell, and her boss Gordon Brown, can carry out this promise while simultaneously removing the tax breaks and incentives that underpin existing savings schemes. In the Budget the Chancellor undertook to cut the tax credit on dividends from the current 20 to 10 per cent in 1999. He also removed the ability to reclaim the credit.
Yet it is, as Mr Warland points out, the ability of PEP providers such as unit trusts to reclaim the current 20 per cent credit which has partly fuelled their explosive growth. As a result of this break, and the associated freedom from capital gains tax, PEPs are now costing around pounds 800m annually in lost revenue to the exchequer.
Neither Mr Gibb nor Mr Warland can work out how Ms Liddell can reduce tax credits and make ISAs as attractive as PEPs. "I don't believe the Government can do it without retaining tax credits and at the current level," said Mr Warland.
In principle Mr Warland welcomes Mr Liddell's commitment. But he thinks a U-turn - to match those taking place over foreign income dividends - is likely: "I think she may have to retract her statement or modify it in some way."
Either way Mr Warland is writing to the Revenue seeking clarification. Ms Liddell's spokeswoman at the Treasury said: "There is nothing I can add. We will be issuing a consultation document about ISAs later this year."
- 2 Qataris pledge to expand Canary Wharf
- 3 #JeSuisEd: People share photos of themselves eating awkwardly in solidarity with Labour leader
- 4 Women think Irish men are the sexiest, survey finds
- 5 Florida couple forced to register as sex offenders for having sex on public beach
#JeSuisEd: People share photos of themselves eating awkwardly in solidarity with Labour leader
Florida couple forced to register as sex offenders for having sex on public beach
UK election candidates: 'Nasty party' Ukip faces fresh questions on eve of vote
Who should I vote for in the general election? Take The Independent's interactive quiz to find out which party's the right choice for you
Ohio 'Shawshank Redemption' fugitive Frank Freshwater arrested after 56 years on the run
In defence of liberal democracy
General Election 2015: Post-election 'shambles' looms as 70 per cent of voters say SNP 'should not be able to veto UK government policies'
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
General election live: Booths open at 7am across the country on polling day
iJobs Money & Business
£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...
£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...