HM Treasury News Release
155/97 3 December 1997
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"WE WANT TO BUILD THE SAVINGS CULTURE"
SAYS ALISTAIR DARLING
"We want to encourage people to save and invest. We
want to build the savings culture. That is good for
individuals. It is good for businesses and it is
therefore good for the country as a whole," the Chief
Secretary Alistair Darling said at the Proshare
Annual Awards dinner in London tonight.
Highlighting the new Individual Savings Account he
said:
"Everyone should have the opportunity to provide for
themselves - whether they are saving for their
future, for their retirement or simply for a rainy
day.
ISAs are aimed at encouraging everyone to save. They
will be simple, flexible and accessible - something
everyone wants and will get.
Our objective is to develop a tax system for savings
which benefits the many and not just the few. Half
the adult population don't save. So everyone should
have the opportunity to save in a tax-favoured
environment, however small the amounts they are able
to put aside.
As we promised in our manifesto the ISA builds on the
experience of PEPs and TESSAs. That is why
investments in ISAs will be tax-free.
We spend 1.3 billion Pounds on tax relief under the
present system - rising to 1.7 billion Pounds in
2001-02. Much of this goes to those who can already
afford to save significant amounts and to tie their
savings up for long periods of time. That isn't an
efficient use of public money. Our objective is to
bring in new savers.
Far better and fairer to use the existing provision
to bring the benefits of ISAs to a much wider
population of savers - possibly encouraging 6 million
new savers. That is right in principle and it is
fair."
On investment, he added:
"We must expand our economic capacity and create the
right climate for high levels of investment. That is
why we have reformed the corporation tax system,
removing the distortions that hinder long term, high
quality investment. In the last Budget we cut
corporation tax to the lowest level ever. And we
intend to cut the main rate again when ACT is
abolished in 1999. This further enhances our
position as the country with the lowest rate of
corporation tax of any major industrialised country
and one of the lowest tax burdens on business."
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A copy of the speech is attached.
SPEECH BY THE RT HON ALISTAIR DARLING MP, CHIEF SECRETARY TO
THE TREASURY AT THE PROSHARE ANNUAL AWARDS DINNER - 3 DECEMBER
1997
Introduction
1. This is the fourth Proshare award ceremony that I have
attended.
2. I am under no illusions about my fate. The day that I
entered the Treasury my attention was drawn to the rogues
gallery - the portraits of my predecessors dating back to the
early 1960s, when the ancient office of Chief Secretary was
established.
3. An examination of the photographs revealed that my five
immediate predecessors had all lost their seats at the
election two days earlier.
4. In its short five years existence, Proshare has been
enormously successful. I have always thought that the 1980s
rhetoric of the "shareholding democracy" was misplaced. It
was a political slogan. It wasn't real. Indeed it was
counter productive rhetoric.
5. The fact is that more and more people do shares directly
or indirectly. That's all to the good. People should know
the relationship between the Stock Market and their shares.
And individual shareholding has worked for many but it isn't
for everyone. Lets be realistic about it.
6. But the more people understand share holding the better.
We want to encourage people to save and to invest. And
Proshare has played a vital part in promoting that wider
understanding.
7. And of course, the best and most successful businesses
are those where everyone in the enterprise from boardroom to
the shop floor is fully engaged in its success. Everyone
should have a stake in the enterprise in which they are
engaged. It brings out the best in people.
8. And encouraging employee share ownership is a important
part of that - nearly 2 million employees now belong to one of
the approved schemes. We want to see employee share ownership
expand. Shareholding should encourage participation and
responsibility.
9. And Proshare has been active promoting wider
understanding of share holding and financial services
generally. This award ceremony helps that process.
10. Indeed Proshare is something of a pioneer in promoting
the use of plain English - helping demistify the world of
finance.
Share holding and saving
11. We want to encourage saving which is why yesterday we
launched the new Individual Savings Account.
12. We believe that everyone should have the opportunity to
provide for themselves - whether they are saving for their
future, for their retirement or simply for a rainy day.
13. ISAs are aimed at encouraging everyone to save. They
will be simple, flexible and accessible - something everyone
wants and will get.
14. Our objective is to develop a tax system for savings
which benefits the many and not just the few. Half the
population don't save. So everyone should have the
opportunity to save in a tax-favoured environment, however
small the amounts they are able to put aside.
15. As we promised in our manifesto, the ISA builds on the
experience of PEPs and TESSAs. That is why investments in ISAs
will be tax-free - up to 50,000 - and 100,000 Pounds for
couples.
16. We spend 1.3 billion Pounds on tax relief under the
present system - rising to 1.7 billion Pounds in 2001-02.
Much of this goes to those who can already afford to save
significant amounts and to tie their savings up for long
periods of time. That isn't an efficient use of public money.
Our objective is to bring in new savers.
17. Far better and fairer to use the existing provision to
bring the benefits of ISAs to a much wider population of
savers - possibly encouraging 6 million new savers. That is
right in principle and it is fair.
18. Two weeks ago we published our consultation paper on
stakeholder pensions. The consultation document we published
yesterday on ISAs builds upon this. More and more people want
to make provision for themselves and we want to encourage them
to do that.
Supervision and regulation
19. And if we are to encourage saving we need a regulatory
environment that commands the support and respect of the
industry and public alike.
20. We promised reform at the election. Four days after the
election we gave operational independence to the Bank of
England. And three weeks later we set out how we would
deliver the radical overhaul to the regulatory system we
promised.
21. And, just over a month ago the new Financial Services
Authority was launched. It will take over the work of
nine existing regulators.
22. In the global economy where markets are changing every
day, where innovation and diversity are an essential part, the
need for a new regulator that has power and flexibility is
essential.
23. For the first time the regulator will have statutory
objectives clearly set out. And the authority will to promote
a greater understanding of the benefits and risks associated
with financial products. The draft financial services Bill,
updating and replacing the various pieces of legislation
covering financial services, will be published next year for
consultation.
24. If we want to encourage people to save and invest we have
to make sure they have the information they need. To have
confidence in the regulatory system. That's good for them and
its good for business. Good regulation should be
complimentary to the business process.
The savings culture
25. We want to build the savings culture. That is good for
individuals. It is good for businesses and is therefore good
for the country as a whole.
26. But of course the Government has also to foster the
right economic climate to enable businesses and individuals to
plan for the long term.
The Government's economic approach
27. The world has been transformed over the last few years.
We live in a global economy. Industries typically span
geographical and political boundaries. No country can go it
alone. Our objective is to ensure Britain is equipped to rise
to the challenge of the world's new and fast changing
economies.
28. We are determined that this country, the first industrial
nation, should be ready and equipped to seize the
opportunities and a new global economy where its skills
creativity and adaptability will mark us out. And there is a
new confidence in Britain today.
29. It's not the job of the Government to pick winners or to
second guess management.
30. But Government must address the fundamental weaknesses
that have held us back for too long. Economic instability.
Boom and bust. Underinvestment. Productivity up to 20% below
that of our competitors. Unemployment and the waste of talent
of too many people.
The Government's economic objectives
31. In the six months since we took office, we have begun to
put in place the building blocks we need. To raise the rate
of sustainable growth to increase the prosperity of the
country, so that everyone can share in higher living standards
and greater job opportunities.
32. First, monetary stability and low inflation - the
essential precondition for growth. Good for business, for
savers, for those on fixed incomes.
33. We have given operational independence to the Bank of
England to set interest rates to achieve the Government's
target for inflation. We have put in place the most open and
accountable set of procedures in the world. And already long
term interest rates have fallen.
34. Second, fiscal stability. The Chancellor in his Budget
in July put in place a deficit reduction plan, cutting the
huge burden of debt left by the last Government. We spend 25
billion Pounds a year servicing public debt. More than we
spend on schools. And at this stage in the cycle we should
not be adding to the country's debt.
35. Thirdly, the Comprehensive Spending Review which I
announced earlier this year will conduct a root and branch
examination of the 320 billion Pounds the Government spends:
5000 Pounds for every man, woman and child. It will ensure
affordable and sustainable public finances and which will set
the spending priorities of this Government, for the rest of
this Parliament and beyond.
36. And fourthly, removing barriers to growth. We must
expand our economic capacity and create the right climate for
high levels of investment. That is why we have reformed the
corporation tax system, removing the distortions that hinder
long term, high quality investment.
37. In the last Budget we cut corporation tax to the lowest
level ever. And we intend to cut the main rate again when ACT
is abolished in 1999. This further enhances our position as
the country with the lowest rate of corporation tax of any
major industrialised country and one of the lowest tax burdens
on business.
38. And modernising the welfare state, getting more people
back into work. Investing in skills and training. Removing
the inflationary pressures that have undermined growth in the
past. We have taken the tough decisions. Putting the funding
of higher education on a sustainable footing for example. All
for the long term good of the country.
39. So the building blocks are there. Stability, sound
public finances, removing barriers to growth and a commitment
to open markets.
40. This Government is outward looking. We have to be and
that has driven our policy in Europe as elsewhere.
41. We are determined to open markets and engage
constructively in Europe. Both the Chancellor and the Prime
Minister have made it clear that we are determined to put in
place the necessary preparations which will allow Britain to
decide to join EMU if economic conditions justify it.
42. We're one of the most open economies in the world -
trading 25 per cent of our GDP compared with America's 10 per
cent. And nearly 60 per cent of our exports are to mainland
Europe and an astonishingly high level of international
investment into Europe - 30 per cent of it - comes to the UK.
43. In less than 14 months from now the German business
selling products to France and the Netherlands will be able to
do so without exchange rate risk, with lower transaction costs
and with more transparent prices, something that in itself
will be a big challenge to a British competitor hoping to
supply the same order.
44. So EMU will lead to fiercer competition for trade and for
future investment across Europe. And the time to prepare is
now long overdue.
45. We are working with business to prepare for the
introduction of the Euro in 1999. The Euro will affect each
and every one of us.
Preparing for the future
46.
In Europe and at home are objectives to obtain long-term
stability. Stability in policy making. Stability in the
economy.
47. Our pre-Budget report last week marks another innovation.
It sets out the major economic issues facing the UK in the
run-up to the Budget in the Spring and beyond.
48. In the modern economy, demand for more openness and
transparency than in the past. Openness builds confidence in
the Government's ability and determination to maintain
economic stability.
49. And we set out clear choices for the country. There is
the opportunity now for sustainable growth. Growth that will
create job opportunities and generate the wealth this country
needs.
Conclusion
50. Tonight sees awards for individuals and business on whose
success we all depend. Government's job is to compliment
business effort. To prepare the country for the future. To
maintain economic stability. To ensure a skilled and
adaptable workforce. To open markets in Europe and elsewhere.
51. But no Government can ever take the place of individual
flair. It is that innovation and enterprise that we celebrate
tonight.