Savings accounts extension among few surprises

Gordon Brown’s pre-budget report speech was short both in length and on measures to make people richer, despite it probably being his last report before a general election.

The chancellor’s speech contained few new initiatives and fewer surprises.

One exception was his extension of the current limit on Individual Savings Accounts (Isas). Faced with the massive decline in Isa saving, Mr Brown reversed his earlier decision to lower the limit savers could put into Isas, and said he would consult on extending the current £7,000 cap for investment in maxi Isas and £3,000 for mini Isas until 2009.

Other measures on savings included an extension of the Savings Gateway scheme, in which the government matches savings £1 for £1 by lower income earners, and a £120m commitment to tackle financial exclusion.

Mr Brown said banks and government were working together to increase the number of basic bank accounts – for people currently without a bank account – and to provide more face-to-face advice and support for not-for-profit lenders.

“Whilst these are steps in the right direction, they will not solve the crisis in UK saving,” said Simon Philip, partner at Deloitte, “There is little here for anyone other than the lower income groups.”

Council tax payers are likely to face less pain next year than in the last few, after Mr Brown announced he would be allocating £1bn back to councils to help them keep council tax bill increases down next year. This was widely seen as a pre-election sweetener.

There was a little in the pre-budget report for high net worth individuals. The chancellor said barriers against investment in start-ups by “business angels”, including deregulation and self-certification, would be removed.

He also announced a reversal of his previous policy which had imposed tax disincentives for university spin-out companies.

The pre-budget report was predominantly aimed at parents and families, with Mr Brown announced a 10-year “childcare strategy” including improvements in maternity and paternity leave, and an extension of flexible working arrangements for parents of older children.

For the first time, the chancellor put a number on the amount that seven-year-olds would receive under the Child Trust Fund. This would be either £250 or £500, the same as the amount received at birth. Parents will start receiving the CTF handouts, announced in the 2002 budget, next year.

Parents will also receive an increased Minimum Income Guarantee amount - £258 for a couple and £199 for a lone parent.

Pensioners were handed out a few sweeteners. The Winter Fuel Payment for both over-70s and over-80s will rise by £50 to £250 and £350, and the pension credit will rise by the same rate as average earnings next year, rather than inflation.

Mr Brown had been widely expected to continue his fight against tax avoidance. In his speech he announced a range of tightening measures against contrived remuneration agreements, film tax legislation abuse, international tax avoidance and VAT.