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Treasury rejects IPPR call to axe equity Isas

A call by influential thinktank the IPPR for the Government to scrap equity-based Isas has been met with incredulity by the investment industry.

The IPPR says equity Isas have missed the Government&#39s target audience and that the £600m which the tax relief costs should be used elsewhere.

It says the income profile of Isa savers in 2001 was no different to Pep and Tessa holders in 1997 before Labour came to power.

The IPPR questions whether the product has met Labour&#39s stated aim to provide a savings vehicle for low-income and medium-income families, particularly people earning £10,000-£15,600.

It recommends April 2004, when dividend tax relief is scrapped, as a good point for the abolition of equity Isas as part of a wider rejig of savings policy.

Research fellow Will Paxton says: “It is not clear what exact policy objective equity-based Isas achieve. We are not persuaded that abolishing them would have any macroeconomic impact – the money would just go into pensions instead. We would be happy to see the money going into a more progressive and coherent savings system.”

IMA chief executive Dick Saunders says: “This is misguided and goes against what the Treasury has been trying to achieve. Peps and Isas have the same profile, as they are largely the same product and have been very successful in extending equity ownership down the income scale. The money would not go into pensions but on deposit.”

A Treasury spokesman says the IPPR&#39s criticisms are misguided and that equity Isas will continue to have an important part to play. He says cash Isas were there for lower-income groups.


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