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LibDems say ISAs will save Treasury billions

The Government is under increasing pressure to raise or scrap the £50,000 limit on the Individual Savings Account.

The Liberal Democrats say that ISAs will save the Treasury money in lower tax relief while adding to the compliance and regulatory costs of the financial services industry.

According to the Liberal Democrats, replacing Peps and Tessas with the ISA will save the Treasury about £4bn over the lifetime of this Parliament.

LibDems Treasury spokes- man Malcolm Bruce MP says the Government should use the savings to cushion the impact on those most affected by the £50,000 limit.

He says: "It should be possible, given the savings that the Government is making, to identify people who have clearly made an effort in that direction and ensure that they are not unfairly penalised.

"We assume it would cost the Government a maximum of £200m, which, considering the savings, is affordable."

According to Treasury figures, about 300,000 investors will initially be hit by the cap although original estimates put the figure at 750,000.

Bruce says: "Tony Blair told the Commons that the ISA would involve more tax relief on savings than planned under the old Pep and Tessa schemes but our research shows that this is just not true."

A Treasury spokesman says: "Claims that the Government is planning to save any money through the introduction of ISAs are complete nonsense. The Government will be spending at least as much on ISAs in future years as on Peps and Tessas."

Autif director of legal and fiscal affairs Sheila Nicoll says: "The Government says the ISA will be as good as Peps and Tessas but it is just a cost-cutting exercise"

£1bn industry cost, p8;

Comment, p29

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