Savings are a passport to personal independence and security; the very foundation of a property-owning democracy. That is why, over the last decade, the Government have set out to lighten the burden of taxation on saving.
We have reduced the basic and higher rates of income tax, and abolished the investment income surcharge. We have stopped taxing the savings of non-taxpayers. And we have extended savings incentives to the mass of ordinary tax-paying savers by introducing tax-exempt special savings accounts—TESSAs—which allow people to invest up to £9,000 over five years in a bank or building society account.
We have also introduced new and popular incentives to invest in shares. In 1986 we introduced personal equity plans to enhance the attraction of investment in shares by making the income and capital gains from them free of tax. Today, I want to improve PEPs still further by removing the £3,000 limit on the amount that can be invested in unit or investment trusts. I propose that from April people should he able to invest up to the full £6,000 a year in qualifying investment and unit trusts. This new opportunity—which will cost £10 million in 1993–94—will provide further encouragement to PEPs, and help to small savers.
We do not see the returns to savings as "unearned income", to be taxed more heavily than earned income. On the contrary, we will continue to lighten the burden of tax on savings, and to broaden the range of investments which receive savings incentives.