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Cameron: cut taxes for savers

By Alice Tarleton

Updated on 05 January 2009

Conservative leader David Cameron promises to scrap income tax on basic-rate taxpayers' savings and increase pensioners' tax-free allowances.

The Conservatives would abolish basic-rate income taxes on savings if they were elected this year, Cameron promised today.

He also pledged to raise the income tax allowance for pensioners - currently up to around £9,180 - by £2,000.

Cameron called for the two measures to be implemented immediately to help tackle "Labour's debt crisis" and turn Britain from a "spend, spend, spend society to a save, save, save society".

Currently all savers can put up to £3,600 a year in a tax-free cash Isa, but interest earned on savings in other non-Isa bank accounts is counted as taxable income.

Cameron said the tax-cutting plans would cost around £4bn, paid for by public spending cuts of £5bn in the 2009-10 financial year. The government is already planning to cut spending from 2010-11.

Although Cameron would protect spending on the NHS, schools, defence and international development spending, other government departments would be restricted to a 1 per cent real-terms increase next year.

"[Labour's recession policy] is morally indefensible because it punishes future generations - and responsible savers in this generation - for the irresponsibility of others."
David Cameron, Conservative party leader

Cameron announced the tax cut plans to mild applause at a speech today at the St Stephen's Club in Westminster.

He also called for more investment in super-fast broadband and greater investment in green technologies, something which the government is also planning to help boost the struggling economy.

Gordon Brown told business leaders today the Tories' opposition to his fiscal stimulus package was both "socially divisive" and "economically mistaken".

Brown said the government would be making a series of announcements on generating thousands of "green jobs", boosting the digital industry and bringing forward investment plans.

In his speech, Cameron branded the government's temporary £12.5bn VAT cut as a "criminal waste of public money" and attacked increased government borrowing.

He called Labour's recession policy economically stupid and morally indefensible because it increases debt and undermines savings.

"It is economically stupid because it keeps the debt crisis going, so everyone from individual families to the government to the whole economy continues to be dependent on foreign-financed debt," he said.

"And it is morally indefensible because it punishes future generations - and responsible savers in this generation - for the irresponsibility of others."


Giving initial reactions to the Conservatives' plans, Jeremy Batstone-Carr of Charles Stanley stockbrokers told Channel 4 News at Noon he broadly welcomed the move, although it was small beer in comparison with other measures seen so far.

"It's a step in the right direction in as far as the consumer is under huge pressure, massively constrained by falling savings rates and by debt," he said.

TUC leader Brendan Barber told the News at Noon: "Certainly pensioners are facing some real pressures with their savings being squeezed with such low rates, but I do worry about how a measure like this will be paid for - if it means further cuts in schools and hospitals, for example, that's very worrying."

Lib Dem leader Nick Clegg accused Cameron of offering a "fake giveaway".

"Cutting savings tax will mean someone saving £100 will only get an extra 40p a year," he said.

"If David Cameron is going to be taken seriously he has to identify what cuts he will make. How many fewer police officers will there be on the street and who will have a smaller pension?

Earlier this morning, Cameron said he "felt like shaking the prime minister" over his handling of the economy and urged Brown to "get with the programme".

The Tory leader called for more action to curb the credit crunch and get banks lending again.

Cameron told Radio 4's Today programme he wanted to tell the PM: "Look, what don't you get - it's a credit crunch, that's what needs to be addressed."

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