Individual Savings Accounts
Mr. Laws
To ask the Chancellor of the Exchequer (1) what his estimate is of the revenue yield from (a) abolishing the tax relief on individual savings accounts and (b) halving the annual subscription limit for ISAs; and if he will make a statement; [130123](2) what his estimate is of the cost to the Exchequer of the individual savings account for each year from 1998–99 to 2005–06; what his estimate is of the effect of the ISA tax relief on total savings; and if he will make a statement. [130148]
Dawn Primarolo
Available estimates of the tax relief on ISAs from 1999–2000 to 2002–03 are contained in the following table.-----------
|Year |
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|1999–2000|
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|2000–01 |
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|2001–02 |
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|2002–03 |
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The estimates represent the reduction in tax liabilities from investment in ISAs. They do not indicate the yield from abolishing ISAs since in practice this could result in significant and uncertain changes in taxpayers' behaviour because of the range of alternative investment options. Therefore, no estimate is available of this yield.There is no available estimate of the effect of ISAs on total savings. Overall, ISAs have attracted a wide range of individuals of different ages and income, whose savings experience will vary widely. They have attracted more younger and lower income savers than TESSAs and PEPs.The relief in any particular year is derived from subscriptions built up over a number of years, including the current year. In 2000–01, the latest year for which estimates are available, contributions in excess of half of the current limits represented around 40 per cent. of the total. Assuming a similar distribution of contributions in every year since the introduction of ISAs would imply that the costs of relief given in the table would have been 40 per cent. lower each year.