Brooks Newmark calls on the Government to do more to reward those who have been prudent in the past, particularly savers, and calls for income from savings to be tax-free for basic rate taxpayers.
Mr. Brooks Newmark (Braintree) (Con): Under the Government's current economic policy, prudence seems to go unrewarded. Regrettably, the Government have still not reacted to the devastating consequences that interest rate cuts have brought to a generation of savers. The Government may be offering bail-out after bail-out to over-leveraged banks. However, they are failing to help, if not reward, those in our society who have put aside money in the form of savings, especially the more vulnerable in our society, such as pensioners, who are now seeing their standard of living drop daily.
We need a savings culture at the heart of our economy if it is to grow out of this recession. Thrift and prudence will ensure confidence and the ability to invest in the future. However, recent economic policy has only consolidated a longer-term trend that has emerged under this Government. That trend, which was exemplified by the Prime Minister when he was Chancellor, is towards a Government built on a mountain of debt and indulging in their own spending binge. Encouraged by the Government's poor household financial management, ordinary individuals have gone on a borrowing and spending binge too. The result is that in 2007 the household savings ratio fell to less than one third of what it was in 1997.
Cutting interest rates was indeed the right thing to do to deal with the current crisis. However, hanging savers out to dry in the process is completely unacceptable. We have now seen seven consecutive interest rate cuts-that is seven consecutive hits on savers and seven opportunities lost by the Government to give help to those who need it. Instead of looking after savers, the Government have written a blank cheque for the banks-many of them the very institutions that helped to create the economic mess. With taxpayers' money keeping them afloat, those same banks continue to slash interest rates on savings accounts, which have reached as low as 0.1 per cent. for some instant access accounts.
Savers and borrowers are confused about how to play the game of interest rate roulette. With low returns on savings, high borrowing costs and interest rate cuts not being passed on to borrowers, people simply do not know what to do. With poor savings rates on offer and a drop in confidence in the banks, it is projected that 45 per cent. of people are less likely to save in the next three months. What is it that people save for? They save to put a deposit on a house, help provide care for themselves in old age or send their children to university. Without savings, none of that can happen, which will have grave consequences for our economic recovery.
The Government may claim that their economic policies are offering real help to the people who need it most, but unfortunately those polices have failed to help the most vulnerable in our society-the poor and the elderly. With interest rates not expected to rise again in the near future, the Government must urgently create incentives to save again. Even bank bosses agree that we need tax incentives for our savers.
I thus ask the Minister at least to reflect on the proposals of my right hon. Friend the Member for Witney (Mr. Cameron) and the shadow Chancellor my hon. Friend the Member for Tatton (Mr. Osborne), as outlined in this debate by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond): to reduce to zero the 10p starting rate and the 20p basic rate of tax on savings, so that basic rate taxpayers pay no tax at all on their income from savings, thus helping them by up to £7,200 a year; and, secondly, to increase age-related personal allowances by £2,000 for those aged 65 and over, benefiting them by up to £400 a year.
To conclude, this debt-addicted Government are doing nothing for those who have been more prudent than themselves. To borrow more money to get the country out of its problems, according to Dr. Tempest, is a bit like telling a heroin addict that he needs more heroin in order to recover. This country does not want a legacy of debt; it needs a culture of saving and a Government who are willing to take urgent action to make it happen.