House moves

As the major political parties begin to gear themselves up for the next general election – widely expected in May – it seems financial services issues will be high on the agenda.

If anyone was left in any doubt that 2005 will be a general election year, in the past week or so both Labour and the Conservatives have launched national poster campaigns.

While Labour focuses on economic competence including low mortgage rates and low unemployment while the Tories focus on the Govern-ment’s credibility and the Blair/Brown feud.

We can expect to be bombarded with policy and personality in the next five months.

Unless outside events, especially following the planned elections in Iraq later this month, knock this off track,I fully expect the Prime Minister to go to Buckingham Palace on April 7 to ask the Queen to dissolve Parliament. This is the last date he can make this move if he wants a general election on May 5.

Everything now points towards this date, not least because of alleged diary plans made by Cherie Blair but also because this is the date set for the local elections. It is highly unlikely the Prime Minister will risk enduring unpredictable local elections and will therefore look to hold the general election on the same day.

This means that when MPs go off for their Easter break on March 24, they are unlikely to return to Westminster and the election campaign will be on. For the first time in years, it appears that pensions, savings and mortgages are going to be high on the domestic agenda.

The Conservatives and Liberal Democrats are set to focus much of their firepower on pensions and the savings ratio while the Government will seek to propose a package of measures to support first-time buyers and key workers.

The opposition parties are already alive to the issues. Last week, on the same day as the Chancellor unveiled the final details of the child trust fund, the Conservatives launched their consultation on savings.

Entitled, Tax on Savings:A New Direction, the document focuses on many of the key issues which have concerned the industry in recent years and is clearly an attempt to garner this support.

Interestingly, the Tories are still looking to consult on these plans and one can see why. They represent a considerable cost to any new Government. They are looking at the following six options:Introducing lifetime savings accounts using matched contributions from the Government to stimulate saving. The principle of matching is similar to the Labour Govern-ment’s own savings gateway initiative. Cost – unknown.Restoring the dividend tax credit for pensions funds. This is a big one which the pension industry is likely to greet with delight. Cost – 5bn annually.Increasing the tax-free annual limits for Isas. Cost – 100m annually.Allowing greater flexibility for Isa savers. Cost – 1.2bn annually.Cutting the basic rate of income tax on savings income. Cost – 900m annually.Introducing tax credits to encourage employers to make pension contributions and arrange for employees to receive financial advice. Cost – 100m annually.

Millennium Dome “fixer” David James recently completed a major report for the Conservatives, suggesting they could save around 35bn from existing public spending. Despite this, with current pressures on the Chancellor in terms of spending, alongside Tory pledges to reduce the burden of tax, the Conservatives must be looking toward making some clear choices.

I would urge Isa providers, pension providers and those who want to see incentives to encourage workplace advice to respond to the Tories’ consultation. The weight of noise on these issues should have a clear effect on the Tories’ decision-making process and the issues they choose to focus on during the election campaign.

Most predict another Labour win but the Tories can articulate many arguments the industry wants to see as part of the wider political debate.

Launching this package, Shadow Chancellor Oliver Letwin said: “A strong savings culture is essential to give people security for their future and independence from the state. The decline in our savings ratio has been combined with a sharp increase in the amount of debt people are getting into. Conservatives believe the tax system should encourage people to save for the future, not penalise saving.”

The final Budget from this Government – likely to take place in the first two weeks of March – will not give away many clues. We expect Labour to keep most of its plans for its manifesto publication.

The LibDems are expected to focus on the concept of the Citizens’ Pension as well as the need to control the availability of credit and wider lending.

The Tories’ consultation ends on January 31. In quick succession we can expect the LibDems and Labour to respond with more detail on their own savings policies. This column will look to address these thoughts in coming weeks.

Iain Anderson is director and chief corporate counsel at Cicero Consulting

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