George Osborne: We must kick debt habit and be a nation of savers
Building an economy which is not based on debt is a Conservative priority, says Shadow Chancellor George Osborne.
Savers and pensioners in Birmingham 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 restimulate 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’s 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 could introduce himself at the Budget on 22 April. It’s a plan to help deal with Labour’s Debt Crisis and help turn Britain from a spend, spend, spend society into a save, save, save society
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 the 1.8 million savers in the West Midlands 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. 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 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 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.
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.
It flies in the face of economic sense 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. And it’s unfair to future generations – and responsible savers in this generation – because they are being punished today because of the irresponsibility of others.
The time to start being prudent is now. Why? Because by doing so we can help the victims of Labour’s recession and help build the long term strength of the economy. For Gordon Brown, the clock is ticking. He can either admit that his economic policy has fundamentally failed, and take action to help savers and kick his addiction to debt, or he can continue to build up more debts that will take a generation to pay off.
The Conservative Party is on the side of savers and pensioners in Birmingham. Unlike this tired and discredited Government, we will not let you down.
* George Osborne is shadow Chancellor of the Exchequer.
