Edward Garnier Sets Out In a Letter to Harborough Conservatives' Chairman What Chancellor Should Do To Help Pensioners and Savers In Budget This Month
7 April 2009
Dear Martin
Savers and pensioners are the forgotten victims of Labour's recession. Over the past year, someone with £10,000 of savings in an easy access high street account has seen their income halve from £50 a month to less than £25. So having done the right thing and put money aside for a rainy day, savers and pensioners are seeing their living standards fall as Labour's recession hits home.
Of course, cuts in the interest rates by the Bank of England are absolutely necessary to try to re-stimulate an economy that has been wrecked by Labour's mismanagement. They are the major weapon in the fight against Labour's recession. But the unavoidable collateral damage on savers is devastating. They are innocent bystanders and it is simply not good enough for the Government to walk on by.
In circumstances like these, the Government should be there to help. But instead, Gordon Brown has made things worse by constantly undermining savings and his tax raids on private pensions.
The Conservative Party will not walk on by as savers and pensioners are being hit. We have an action plan, which Gordon Brown should introduce himself at the Budget on 22 April. It's a plan to help deal with Labour's Debt Crisis and help build an economy built on saving and investment.
First, action is needed to help savers. At the moment, income from savings in bank accounts suffers from double taxation - the money is taxed when you earn it and then any interest is taxed again. For basic rate taxpayers, this unfair double taxation of savings should be abolished. This would benefit up to 25 million savers by as much as £7,200 per year. And the biggest the biggest benefits would go to people who are dependent on income from savings and do not have other income. This would not only help savers today, but would help encourage more saving in the years ahead.
Second, action is needed to help pensioners. Over the past decade, Labour has decimated private sector pensions, and action is urgently needed to restore confidence in Britain's pension system. This means taking action to encourage people to save for the future, and helping existing pensioners hit hard by the recession. That is why we are calling on Gordon Brown to increase age related personal allowances for those aged 65 or above by £2,000. This tax change would mean that a pensioner couple with a total pension income of £14,000 a year would be up to £800 a year better off.
Third, we need action on annuities. At the age of 75, pension holders are forced to buy annuities which will fund their old age. However, during a financial crisis this means that many are being forced to buy annuities would consign them to a lower income for the rest of their life. Labour needs to show common sense and compassion on this issue. Our long term plan is to replace the current annuities rule altogether along the lines set out in the Private Members Bills promoted by a number of colleagues. This means allowing more flexibility and suspending the requirement to annuitise accrued pensions at the age of 75. This small change could make a real difference to people's lives, and there's absolutely no justification for the Government's dithering and inaction on this issue.
Gordon Brown should announce all of these policies at next month's Budget, and pay for them by cutting wasteful government spending. Over the next month, the Conservative Party will be campaigning around the country to fight for a better deal for Britain's savers and pensioners, and calling on Gordon Brown to stop dithering and take action. As part of this campaign, the Conservative Party's Shadow Cabinet will be taking part in events across the country, knocking on doors and talking to the public about our plans to build a culture of saving in Britain.
We're doing all this because we understand that Britain needs to change from an economy built on debt to an economy built on savings, from a country and government that has lived beyond its means to one that lives within its means. That's why we're so critical of Labour's recession policies, because they actually increase debt and destroy confidence. This not only flies in the face of economic sense, but it's also unfair to future generations.
With best wishes
Edward
Edward Garnier
