This budget was always likely to be centred on two items, the improvement of public services and the raising of tax to provide it and so it proved to be. From a pure investment/savings point of view, investors were ignored.
Indeed the increases in the tax is hardly an encouragement to save, especially those with lower earnings. For those with large pockets the rules relating to takeovers and mergers of VCTs, which now means investors can keep their tax shelter, is excellent news. This should mean that VCTs will become more marketable in the “2nd hand market”. At present VCTs are too small, making realisation more difficult. By allowing mergers etc this could help them create much larger VCTs which in turn should make them more attractive for institutions to buy into. Increasing liquidity in this area shows that their investments will not just be dependent on tax relief to make them more attractive.
Disappointed to see news on the children's savings scheme and no reform on the tax credit for Isas on which dividends will be abolished in 2004, thus making this savings vehicle less attractive for just the asset class that investors should be buying into – UK income funds. These provide potential for retirement and income growth – a prime requirement for those coming up to and at retirement.
Mark Dampier is head of research at Hargreaves Lansdown