Tessas Tory hope for pounds 2bn 'feelgood' boom

A pounds 2bn spending boom financed by maturing Tessas is part of the Government's strategy for reviving the "feelgood factor", to be thrashed out today by the Cabinet, writes Colin Brown.

The special meeting of the Cabinet, called by John Major to discuss the Tory plans for a spring offensive, will be told the Treasury expects about 10 per cent of the total Tessa bonanza of pounds 20bn to be spent in the economy, raising the chances of rekindling the "feelgood factor" for the Government.

The Treasury has estimated that 2.5 million Tessa accounts, yielding pounds 15bn, will mature in the first quarter of this year, with a further pounds 5bn to follow by the end of 1996.

Independent research suggests the money will be spent on holidays, cars, homes and services, such as education fees.

Party sources said the Cabinet will be told the tax cuts in the last Budget, which take effect in April, and cuts in interest rates, which have reduced mortgages by up to pounds 150 a month, should make the average family feel pounds 450 better off.

The Chancellor plans a tax-cutting Budget in November but Conservative Party sources denied the Government was creating an inflationary boom.

There are signs the Chancellor is concentrating resources on trying to fulfil the 1992 election manifesto commitment to "make further progress towards a basic income tax rate of 20p."