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Darling to shaft savers!!
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silentfox
Posts: 100 Forumite
UK Budget expected to disappoint savers
By George Parker, Jim Pickard and Alex Barker
Published: April 7 2009 20:16 | Last updated: April 7 2009 23:21
http://www.ft.com/cms/s/0/ff207b62-23a4-11de-996a-00144feabdc0.html
Savers hit by plummeting interest rates will not receive a large package of assistance in the Budget, in spite of pressure from the Conservatives and pensioners for significant tax breaks.
Alistair Darling, the chancellor, has rejected a Conservative plan to abolish basic rate income tax on savings income, even though the cost of the scheme has fallen from several billion pounds to as little as £300m as interest rates approach zero.
Although Mr Darling’s Budget on April 22 is expected to contain some modest measures to help pensioners and savers – including a possible increase in the Individual Savings Account limit – it will fall far short of a £4bn thrift package promised by David Cameron, Tory leader.
The chancellor believes that tax cuts will make only a marginal difference to savings decisions at a time when interest rates are so low – and he has no money to fund those cuts in any case. The reality of the modest Budget savings measures jar with comments by Gordon Brown last month. “We are trying obviously to make sure in an era of low inflation that the incentives to save can remain high,” the prime minister said.
Government officials point out that savings are already rising across the economy as households put money aside as an insurance against a worsening recession.
The other symbolic problem of having a “Budget for savers” is that Mr Darling is still trying to boost demand in a chronically weak economy; persuading consumers to spend remains his top priority.
Mr Darling knows he will face criticism for not doing more for savers, though he is expected to announce some tweaks to Isa thresholds – increasing the tax-free limit. His officials point out that half of households have savings of less than £3,000 or none at all.
Pensioners will also get some special help, although Mr Darling is thought to favour more general help to the elderly – possibly through pension credits – rather than targeting help on those with the means to have savings.
The cost of cutting the tax on savings – a policy first put forward by the Tories in January – has fallen from several billions to as little as £300m, according to experts.
But the cost of a tax exemption for basic rate savers has fallen to about a sixth of its level at the turn of the year, when the Tories laid out detailed plans to do just this.
With interest rates having dropped from 5 per cent in early October to just 0.5 per cent today, many bank rates are paying out negligible monthly interest to savers.
Current products include instant cash Isas from Barclays and Alliance & Leicester, both offering 0.1 per cent interest, or a “flexible saver” product from HSBC paying 0.05 per cent.
Carl Emmerson, deputy director of the Institute for Fiscal Studies, said the price of a tax break on savings would be “a lot smaller” as long as the cut was only temporary. “It would be a fraction of the cost,” said Mr Emmerson.
The original announcement was a significant decision by Mr Cameron, because it pitted him head to head against Mr Brown, whose emphasis in recent months has been on increasing expenditure rather than saving.
Mr Cameron said in January that a one-year exemption on savings tax for all basic income tax payers would cost £2.7bn as part of a wider £4bn package.
Senior Tories are still claiming that the measure would be worth billions of pounds.
In reality, however, the figure – which had been based on October estimates of the government tax take for 2009/10 – could now be as low at £300m, according to calculations by the Financial Times.
"Darling"..... more like BAST?%D !!!
By George Parker, Jim Pickard and Alex Barker
Published: April 7 2009 20:16 | Last updated: April 7 2009 23:21
http://www.ft.com/cms/s/0/ff207b62-23a4-11de-996a-00144feabdc0.html
Savers hit by plummeting interest rates will not receive a large package of assistance in the Budget, in spite of pressure from the Conservatives and pensioners for significant tax breaks.
Alistair Darling, the chancellor, has rejected a Conservative plan to abolish basic rate income tax on savings income, even though the cost of the scheme has fallen from several billion pounds to as little as £300m as interest rates approach zero.
Although Mr Darling’s Budget on April 22 is expected to contain some modest measures to help pensioners and savers – including a possible increase in the Individual Savings Account limit – it will fall far short of a £4bn thrift package promised by David Cameron, Tory leader.
The chancellor believes that tax cuts will make only a marginal difference to savings decisions at a time when interest rates are so low – and he has no money to fund those cuts in any case. The reality of the modest Budget savings measures jar with comments by Gordon Brown last month. “We are trying obviously to make sure in an era of low inflation that the incentives to save can remain high,” the prime minister said.
Government officials point out that savings are already rising across the economy as households put money aside as an insurance against a worsening recession.
The other symbolic problem of having a “Budget for savers” is that Mr Darling is still trying to boost demand in a chronically weak economy; persuading consumers to spend remains his top priority.
Mr Darling knows he will face criticism for not doing more for savers, though he is expected to announce some tweaks to Isa thresholds – increasing the tax-free limit. His officials point out that half of households have savings of less than £3,000 or none at all.
Pensioners will also get some special help, although Mr Darling is thought to favour more general help to the elderly – possibly through pension credits – rather than targeting help on those with the means to have savings.
The cost of cutting the tax on savings – a policy first put forward by the Tories in January – has fallen from several billions to as little as £300m, according to experts.
But the cost of a tax exemption for basic rate savers has fallen to about a sixth of its level at the turn of the year, when the Tories laid out detailed plans to do just this.
With interest rates having dropped from 5 per cent in early October to just 0.5 per cent today, many bank rates are paying out negligible monthly interest to savers.
Current products include instant cash Isas from Barclays and Alliance & Leicester, both offering 0.1 per cent interest, or a “flexible saver” product from HSBC paying 0.05 per cent.
Carl Emmerson, deputy director of the Institute for Fiscal Studies, said the price of a tax break on savings would be “a lot smaller” as long as the cut was only temporary. “It would be a fraction of the cost,” said Mr Emmerson.
The original announcement was a significant decision by Mr Cameron, because it pitted him head to head against Mr Brown, whose emphasis in recent months has been on increasing expenditure rather than saving.
Mr Cameron said in January that a one-year exemption on savings tax for all basic income tax payers would cost £2.7bn as part of a wider £4bn package.
Senior Tories are still claiming that the measure would be worth billions of pounds.
In reality, however, the figure – which had been based on October estimates of the government tax take for 2009/10 – could now be as low at £300m, according to calculations by the Financial Times.
"Darling"..... more like BAST?%D !!!
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Comments
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This IMHO really is silly. For those people on average savings whether their 0.5-1% interest is taxed or not makes very little difference. If they put their relatively small amount of cash into an ISA they can get the interest tax free now.
Removing savings tax would only make a difference to people with very large cash resources beyond what could reasonably have been ISA'd.
Which group of people do you think should get priority in any government distribution of cash? Which group of people would Mr Cameron want to benefit?0 -
I don't know too much about the budget report. From the article it says Aprill 22nd. If a higher allowance is agreed (from 3600 to 3800 for example), when would this take affect?0
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YoungSaver20 wrote: »I don't know too much about the budget report. From the article it says Aprill 22nd. If a higher allowance is agreed (from 3600 to 3800 for example), when would this take affect?
I dint see why it would be a problem for this tax year, people who have put in £3600 could just top it up with the extra if they wish to.0 -
With interest rates having dropped from 5 per cent in early October to just 0.5 per cent today, many bank rates are paying out negligible monthly interest to savers. /QUOTE]This is a rather disingenuous statement. If you are prepared to tie your money up for at least a year you can still get over 3%. If, as expected, the rate of inflation continues to drop over the coming months, then the net result will be similar to last October.
Can I also suggest that simple abuse, such as calling someone a "bast?!d" is neither helpful, nor does it do any favours for your argument."The trouble with quotations on the Internet is that you never know whether they are genuine" - Charles Dickens0 -
I dint see why it would be a problem for this tax year, people who have put in £3600 could just top it up with the extra if they wish to.
I'll have an each-way bet that any increase in the Isa allowance will be from April 2010Liquidity is when you look at your investment portfolio and **** your pants0 -
Unusually biased article from a paper like the FT in my view - more like daily mail fodder.
Why should savers and pensioners get special treatment? Where to they think the money to pay for such a package come from?
Sure they can have their £4bn conservative vote buying package but their children and grandchildren will have to pay for it through higher income taxes, vat or more expensive mortgages. Or they could get worse care treatment or NHS services or other government services.
We are all in this mess together, although I do agree that sensible savers who did not borrow excessively and did not take risks with their savings (putting them in iceland to earn higher rates and expecting the rest of the savings community to bail them out) are being hard done by.
Personally I don't see why interest on savings generated out of taxed income should be taxed at all, given that interest rates in the long term barely keep track with inflation.
It is this punitive tax that drives people to invest in tax havens or take unnecessary risks with their money.
But introducing a tax cut like that now when we have such a huge government deficit would be stupid and just lead to a weaker currency or much higher taxes elsewhere.
R.Smile
, it makes people wonder what you have been up to.0 -
The article and the signature of the OP should be considered spam.0
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The tax saving for basic rate payers with £3000 @ 2% interest would be £12 a year. What would you spend yours on, a couple of pizzas?half of households have savings of less than £3,000 or none at all.
Paying less tax is always nice and there is certainly a case for taking inflation into account when calculating savings income. Deciding what services to cut not so nice. As generally in life, you only get what you pay for.0 -
I am not so underwhelmed as some so even an additional £12 I will be grateful for - it all helps!!John0
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Sure they can have their £4bn conservative vote buying package but their children and grandchildren will have to pay for it through higher income taxes, vat or more expensive mortgages. Or they could get worse care treatment or NHS services or other government services.
Can I point out the last 12 years have seen a £350Bn+ (Increase in government spending) vote buying package by Tony & Gordon for often negligible "improvements" in service that have caused large tax increases with even larger ones planned.
Thanks
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