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Savers promised £4bn cut in taxes
Joe Murphy, Political Editor05.01.09
DAVID CAMERON offered £4.1 billion in tax cuts for pensioners and savers today.
In a bold return to the Tories' favourite election territory, he proposed scrapping tax on interest from savings of those earning up to £43,000 a year.
In addition, he and shadow chancellor George Osborne held out the prospect of a £2,000 rise in the personal allowance on which no tax is paid for the over-65s.
The changes would be worth hundreds of pounds, especially to pensioners and others who depend on interest from their life savings to make ends meet. Mr Cameron called them “innocent victims” of the recession.
The move comes days before the Bank of England is expected to cut at least another half point off interest rates — bringing relief to homeowners but whittling down the incomes of savers.
However, the Tory proposals would be funded with a tighter-than-ever squeeze on public spending, with welfare, transport and local government all expected to make savings.
Mr Osborne said a Conservative government would match Labour spending plans on health, schools, defence and international aid.
But overall Whitehall would have to spend £5 billion less than Labour's published plans, meaning that every other department, including higher education, could face cuts.
Conservative officials costed the savings tax cut at £2.6 billion, with the pensioner allowance costing another £1.5 billion.
The move by Mr Cameron and Mr Osborne opened up a wide gap between their strategy for coping with the recession and that being pursued by Gordon Brown and Alistair Darling.
In a preview of the next election battle, expected in 2010, the two leaders went head to head in rival speeches this morning.
Mr Brown advanced his rival agenda of higher spending to prop up jobs in a speech to business leades, trade unions and regional economic development chiefs in Whitehall.
“We must invest out of the downturn to equip us for the upturn,” declared the Prime Minister. He accused past Tory governments of being “happy to see those losing their jobs put on the scrapheap
... that will not happen now”.
The Tory leader denounced Mr Brown's record, saying his policies were saddling generations with debt yet failing to cure the recession or even get the banks lending again.
He called on Mr Brown to boost bank lending to firms by rushing out a bigger credit guarantee scheme, adding: “I feel like shaking the Prime Minister sometimes and asking him what is it he doesn't get.”
Mr Cameron said: “The longer they're in, the worse it gets. We've had a bank renationalisation that failed to get credit flowing and the economy moving, we've had more of the borrowing that got us into the mess in the first place.”
Replying to Labour's claims that the Tories would “do nothing” he added: “That VAT cut was an absolutely criminal waste of public money, and it's not working.”
Repeatedly, Mr Cameron used the word “grim” to describe the future under Mr Brown — while painting his own vision as optimistic.
He called for an early election, warning of “a grim life of debt and despair” under Labour.
Mr Cameron's tax-cutting proposals fell short of a solid pledge for the next election manifesto, which will probably not be written until spring 2010. The Tory leader won applause from his audience of Tory businessmen at Westminster.
His speech also pleased Tory MPs who have been looking nervously at recent poll figures that showed Mr Brown catching up on the back of his strong leadership on the economic crisis.
Labour was swift to hit back.
Chief Secretary to the Treasury Yvette Cooper said: “David Cameron is making empty promises to hide the fact that the Conservatives would do nothing to help the British economy, and once again would turn their backs on the British people in difficult times.”
Tax help on savings
THE Tories aim to scrap tax on income from savings for all but the better off.
Detail: Anyone earning up to £43,800 would not pay tax on interest from savings accounts.
Examples: A 60-year-old retired couple with £12,000 income each, plus £1,000 interest on savings, currently pay £200 each in tax on interest — so would be £400 better off.
A 40-year-old single mother earning £10,000 a year part time gets £800 income from savings, so saves £160 in tax.
A City worker on £60,000 salary with £2,000 from savings does not benefit, but continues to pay higher rate tax on the entire interest.
... and pensions
David Cameron is planning a £2,000 increase in personal allowances for over-65s.
Detail: The personal allowance rises from £9,490 to £11,490, saving up to £400. Everyone on incomes between £9,490 and £32,930 gains something but the value tapers off steeply above £22,090 so higher earners get nothing. For over-75s it rises from £9,640 to £11,640.
Example: A 70-year-old couple with total pension income of £14,000 a year each pay £1,804 in tax and this would fall to £1,004, making them £400 each better off. If they also get £1,000 a year each in savings interest, they would save an extra £400.
Reader views (41)
I am no Brownite but this is a misguided attempt to win votes and shows that Cameron is also unfit to run the economy. Long term this is the right move but in the current environment this will cause major problems.
This is spin and will not encourage saving. This cut is equivalent to 40 pence in every 100 pounds saved and will not even return saving returns to the levels where they where when rates where at 3%. To fund this money and effectively jobs will be lost from the private sectors. At this moment in time the government needs to spend and borrow to stimulate the economy and create jobs. This is unfortunate but nessary.
- Alex, London
Ian: "This type of extreme devaluation of our economy has only ever under Labour governments, it’s part of the package"
Not true: when Mrs Thatcher came to power the pound:US$ rate was 2.0775. It reached a low in February 1985 of 1.0545 - a near 50% devaluation - recovering to about 1.63 when the Conservatives left offfice in 1997.
- Tonyb, Melbourne, Australia
So that's Dave's policy for this week. He will change his mind next week.
The vast majority of people are benefitting from the cut in interest rates which has reduced their mortgage payments considerably.
This will appeal to the lucko ones who can afford to save, but they are the minority.
This policy will appear to many traditional Conservative voters, but will do little to persuade the general public that Dave and George are suitable to run the country at the next election.
The simple message to the Conservatives is that their policies must appeal to the majority of votes. This one fails miserably in that respect.
- Andrew W1, London
Dave Davies - wrong. It benefits only those pensioners liable to pay tax. By definition they are wealthy at least in comparison with pensioners who have no savings. All pensioners benefit from the reduction in VAT however.
- Billy Ricky, Sydney Australia
Olusegun Opanuga - you say that the Tories should no longer be the mainstrean opposition party because they have lost touch with general peoples opinion, are you serious?. New labour are a million miles away from the real world and are quickly trashing our Country - they are not fit to be an opposition party yet alone the Government!. The Tories will be a much better government than the present regime, if there is anything left.
LABOUR HAVE BANKRUPTED US.....AGAIN.
- Markburton, St Ives Cambs
Capitalism cannot succeed without Savers. Banks cannot loan what they do not have, the money loaned by the Taxpayers (£37 billion) has done little to address their over-leveraged position, they still have little money to lend. Their saviour and thus the economies is the Saver,
this is the Superman/Woman who can save the British economy.
The forgotten people, the ones Gordon Brown has been trampling on since he came into office, first by destroying their savings in private pensions and now by reducing interest rates for savings to zero.
This makes his ignorance of how capitalism works all the more apparent, never having worked at a real job in his life he does not realise Banks and Building Societies have no money of their own. The money they loan out is other peoples, namely those thrifty people he so despises; Savers.
Gordon like some extinct dinosaur come to life, lives in a delusional world where the need to earn money before you can spend it has yet to be invented. He has neither the capacity to learn from personal experience (you have to admit to mistakes) nor by listening to others.
Like the Lemming he can only do the the forward gear towards the precipice, canting repeatedly; spend, spend, spend.
- Robert, Dumbarton
All`s Labour know is Tax,Spend,Waste and bankrupt the country.That`s it,they know nothing else,it happens every
time they get into power!
- Mark A, london england
Well Done! There are seven times more savers than borrowers - all will be voting Conservative for this tax break. We are tired of supporting the profligate.
- Diana, London, UK
At last something sensible from a politician. Its a small step but one in the right direction. I used to save, small amounts with a Dutch bank, firstly this was PAYE taxed money from my salary, then I would deposit this and get taxed again. So double taxation. I gave up in the end. No wonder we are a society steeped in debt and now going to have to go through several pain-thresholds and will still be trying to borrow money, albeit from foreigners for decades to come.
- Bondy, london
CFrash Gordon has mis-delivered and it is true that tax-cuts are good for this country. We have to put right ten years of British government waste.
- Jacqueline, Hampstead, London
Tories at it again. We know old habits hardly die. You don't need a magician to tell you that you this £4b tax cut don't add up especially during this economic downturn. The resultant effect of this cut is deflation.
Tories should no longer be the main stream opposition in British politics because they do not relate with the general people's opinion
- Olusegun Opanuga, Dulwich & Norwood, London, UK
Am I hearing this right Dave? You are prepared to give away £4 billion? And using the same old tired excuse of 'affording' this give away through government savings? You are living in a dream world mate and goes too prove that you have no sense of being able to govern this country.
- John, London, UK
More glib nonsense from the posh boys.
- Colin, barking essex
It was dumb to believe that Gordon Brown’s concept of borrow and borrow again would somehow make us rich. Gordon Brown has now proved he is the least experienced chancellor in history, the majority of the UK’s families have more of a concept of how to handle a budget than he ever did.
While there are some world affairs that have some bearing on the state of the UK economy, these are minor in relationship to the damage Gordon Brown and his socialist doctrine has caused. This is also reflected in how other economies see the UK, the consequence is that the pound has now been devalued against every other nations currency.
This type of extreme devaluation of our economy has only ever under Labour governments, it’s part of the package. This time however there is no industry left to capitalise on it – Gordon Brown and his cronies got rid of it.
There may be of course a correlation that in the main Gordon Brown’s (including himself) government is made up of people that have never worked in the real world or have never been elected. Therefore we get the dumb leading the dumb.
- Ian, Reading, England
David Cameron is on the right road to Downing Street in his postion for granting tax release on savings, this will help the pensioners. Unlike Gordon Brown who is taxing them into poverty. Gordon Brown is blaming the rest of the world for this recession when he was the chancellor for many years - surely he was aware what was happening to the financial market.
- Foxxy, ilford, Essex
If Brown had encouraged saving we would not be in this mess.
- Roger Slade, Winchester, Hampshire, England
It would also be nice if Cameron were to promise to increase pensions to where they would have been if Thatcher had not abolished the link to pay increases in the disastrous time she was in power.
- A Bullet, Epsom England
Something needs to be done about the level of Nu Labor taxation that Bean Brown brought in. And we have no money to spend - I understand that the UK is in the worst situation at the worst time according to the IMF... shame on the Bean Brown... he said he was an economic genius!
- Ally, London
Keith Priceless, Luton. This IS a great idea. It targets the most dissadvantaged in our society - the elderly. They form, the highest proportion of those on low incomes. Do some research before writing in future. You socialists should be pleased, but you wont be, as this is about real help, not controlling lives with lies.
- Dave Davies, Basingstoke
Keith Price from Luton - are you really that gullible as to believe that the UK's problems are ALL caused by the US. The credit cruch certainly began in the US with their innapropriate lending practices - Conservatives and Liberal Democrats have never denied that. However, you really do need to wake up to the fact that the recession in the UK will be much longer and harder than in any other major economy SOLELY because Gordon Brown (as Chancellor) made all the wrong decisions and has left the UK economy ill-prepared to deal with the worl-wide issues. The level of UK debt, the state of sterling, the sheer level of unemployment that we will experience (over 3 million) wasn't caused in the US. There's simply no money left in UK coffers (Gordon spent it all, or sold half of our Gold reserves at the bottom of the market)to help the UK economy. All Gordon/Alistair can do is borrow even more, to be paid back later by the increase in taxes they've already announced. Apparently they're now looking at an extended Loan Guarantee scheme, originally proposed by Cameron & Osborne months ago. Labour accuses the Toroes of "doing nothing", when actually all Labour has to offer is borrowing more money OR introducing Tory proposals.
Keith, you have to wake up soon surely!!
- Malcolm, London
It would also be nice if Cameron were to promise to increase pensions to where they would have been if Thatcher had not abolished the link to pay increases in the disastrous time she was in power.
- A Bullet, Epsom England
More empty promises which if the Tories are elected can be broken anyway.
- Mark H, London England
I think what Mr. Cameron says is good. I am tired of hearing Gorden Brown blaming everyone else except himself for the plain fact that Britain is in the poorest postition of all big countries...
- Steveo, London, NW1
Keith Price - The recession was kicked off in the US but unlike most of the rest of the world the UK has been allowed to borrow and acumilate more personal debt under Labour than any other Western country. This makes us more vunerable than any other Country in Europe to the smallest of changes..this all happend under a Labour government and it is the same Labour Government who also believes that to get us out of this mess we should borrow more. So are going to put your faith in a PM and a former chanchellor who has allowed this to happen and who also has no real world experience i.e. Brown has never worked in a private sector company
- Fly, london
Well they'd better do something for us old age pensioners because we are now a big voting block. If our leaders don't take this into account we shall vote them out and make a new law in parliament - nobody can be an MP under 65 years old! That would put a brake on unbridled ambition and might get some work out of them. Also, expenses and allowances would be banned. That way there'd be no 'administrative oversights' as we have come to see so many of recently. And, no foreign trips at taxpayers' expense for invalid reasons. Think of the money the country would save! Vote for the OAPs!!
- John Problem, Hackney Wick, London, UK
Whatever anyone may think of the Tories how on earth could anyone make more of a mess of things than Labour have done.
Anyone in a job in the private sector is worse off. It seems to me all they do is line the pockets of their client state and fuel the politics of envy.
Given the state of the country we need a G/E to decide on a way ahead.
- Kevin, london
Of course this won't help the poorist in our community who can't afford to save as every penny of their income is spent just to get by.
- Mike Melbourne, Bedford England
About time someone thought of the savers - in the West savers are rare beasts and they are punished for their prudence. China and Japan are awash with savers and they're the ones who will weather the storm better than we shall.
- Derek, London
This is a very nonsensical idea from a totally inexperienced politician. He cites the world recession as a being a Gordon Brown creation when the rest of us scknowledge that the recession began in the US banking system. When a Tory politicain spouts this nosense you just know you can.t trust him
- Keith Price, Luton, England
This is a very nonsensical idea from a totally inexperienced politician. He cites the world recession as a being a Gordon Brown creation when the rest of us scknowledge that the recession began in the US banking system. When a Tory politicain spouts this nosense you just know you can.t trust him
- Keith Price, Luton, England
This is a very nonsensical idea from a totally inexperienced politician. He cites the world recession as a being a Gordon Brown creation when the rest of us scknowledge that the recession began in the US banking system. When a Tory politicain spouts this nosense you just know you can.t trust him
- Keith Price, Luton, England
As a saver and someone who steered clear of debts and overspending, I am encouraged by this idea. However, I would want to see a guarantee that NHS and Education spending is protected from any cuts rather than an empty promise - at the moment the Tories do not have a good record in this area. I shall watch with interest
- Keith Grey, islington, UK
Same old story from Gordon Brown - announce some "new" initiative but on closer inspection what do you find "SPIN". Not all the jobs are "new" and the money invovlved has already been announced so it's not "new" money. At least the tax cuts propsed by George Osborne are targetted at the right area (Pensioners & Savers). Of course Labour will cry "undunded", but of course NONE of their initiatives are funded either but all paid for by increased debt. Move over Gordon.
- Malcolm, London
My family have always worked and saved. I resent being ripped off to support stupid over-extended borrowers and irresponsible banks (and an reckless wasteful government)
On Saturday morning I received a letter from National Savings in which they admit that may savings with them will GO DOWN in value. If they were a commercial bank the government would say they were being dishonest.
We cannot spend our way out of this. Remember Argentina and those locked banks and disappearing savings. Give Brown another year or two and it will happen here.
- Anglo, Sussex UK
What ever you do boys you're gonna have to work harder at getting your message across. Also you will need to work harder at bashing Loony-Labours mad policies and ethnic cleansing of London. Boroughs like Brent and Harrow have become cesspits waiting to explode were you can cut the atmosphere with a knife. Family life has been drained from many parts and replaced by those living on benefits with no connection with U.K and no intention of staying but for free hand-outs. Ps beer cans every where urinating and defecating in the street is common and that's by the women! The Tories must help us get our communities and family life back on track.
- Mike,, London
That's assuming there is of course anything left in the pot after Labour have 'handled' our taxes.
- Eddie, London
Good that someone is finally recognising that there are some savers out there who are now suffering in Gordon Brown's recession. Every press article I see these days seems to centre on the "poor, innocent" credit crunch victim, who, having gorged themselves on cheap credit over the past few years and spent every penny they've earned without putting anything aside is now in dire straits. How about some kind of reward for people who had the foresight to put something aside rather than bail out packages for the fools who spent money like water?
- Mcw, London
"They did the right thing during the age of irresponsibility and now their incomes are being unfairly decimated as the Bank of England has been forced to cut interest rates."
But, Mr Osborne, YOU were the one calling for interest rate cuts as reported here 29 October last:
http://www.thisislondon.co.uk/standard/article-23579467-details/Osborne:+We+need+rate+cuts+not+spending+spree/article.do
My comment appears below the story: "In calling for a cut in interest rates does it not occur to George Osborne that pensioners are more likely to having savings than mortgages?" Evidently not.
- Tonyb, Melbourne, Australia
Mr Osborne refuses to reveal why he attended the Bilderberg conference in 2007 and what was discussed there. I need help in bombarding him with demands that he reveal the Bilderberg agenda, as my lone voice is insufficient to cut through his arrogance. Thank you.
- Neil, london uk, Airstrip ONE .
I'm sure that last year the Tories wre promising to simplify the Tax system. Now they seem keen to introduce yet another Tax loophole which will no doubt be used for further Tax evasion by Fat Cats.
- A Ostler, Epsom England
The first thing I have heard sensible from a British politician in a long time. Nu Labor should go away.
- Georgie, Islington, London
