Full marks!

Cameron today committed his party to two important things:

1) Removal of tax on savings income for all paying tax at the standard rate.

2) Increasing retired ( i.e. over 65 years old) tax allowance by £2000, that is an increase in after tax income of £400 per year.


The first proposal will achieve two things, firstly it will recompense all those who live on income from savings and who have suffered by greatly reduced interest on their savings and also inflation, and secondly it will encourage many to begin saving again. (Whereas BB (before Brown) we were saving on average 10% of our income, after nearly 12 years of him we are saving less than 1%, and in fact have been encouraged to overspend and go into debt. The consequence has been, in part, that because we were not depositing as much money as before with banks and building societies, they have had to borrow much more from other banks to provide cash for mortgages, - we have contributed to the credit crunch.)

The second proposal will help a group of people who have been facing the highest rate of inflation of all of us. The goods which take the bulk of pensioner spending, - heating, lighting, food in particular, have seen the greatest price rises over the past few years, and state retirement pensions have not kept pace.

So long as the very poorest pensioners, those who are trying to live on £120 a week state pension ( that is on an income of little more than half the minimum wage,) and currently pay no tax, are also paid more by some means, - preferably a significant increase in the state pension as soon as possible, this all sounds very good.

The two proposals are very welcome. They try to help some of the poorest members of society and they will encourage thrift among many more. If we are ever to get back into some kind of balance then the virtue of thrift must be rediscovered.

There will be a price, of course, and that will be reflected in reduced growth of all future government expenditure except health, education, overseas aid and defence. The effect will be moderated to the extent that the next government is able to make massive savings - (ID cards, useless computer systems, quangos, anyone?)