Finance Bill

We are prepared to examine a range of options to try to encourage people across the income spectrum to save for their pensions, but we simply do not think that a £4.3 billion hit on pensions savings is what our pensions system needs at the moment, and that is what the Liberal Democrats are proposing. Given that the savings ratio has been halved during the 10 years of the Chancellor’s tenure at No. 11, we think that the last thing the country needs is the complete abolition of an important incentive to save for old age, particularly when it is not accompanied by any compensating incentives elsewhere in the system. I am not convinced that the numbers in the Liberal Democrats’ tax package add up. When it was first announced, the Institute for Fiscal Studies identified a £500 million underestimate of the cost of their proposed income tax changes. And the problems do not end there. For a start, as we have heard from the Chief Secretary, the Liberal Democrats have not produced any convincing details of how they would raise £8.1 billion in green taxes. Nor am I convinced that they have got their numbers right in the capital gains tax part of their package. They claim that those changes would raise £6.2 billion, but, they seem to have underestimated the impact on behaviour of changes in the system. After all, for many people capital gains tax is a postponable tax. When rates and reliefs are amended to become less favourable to the taxpayer, there is an incentive to sit on assets.