Clause 37
Finance Bill
4:30 pm
Kitty Ussher (Economic Secretary, HM Treasury; Burnley, Labour)
I will answer the hon. Gentleman’s question, but I also want to make some remarks on the background, because he implied that the purpose of clause 37 was to help us rebuild Northern Rock’s retail base, which is not true at all. It was a logical point of fairness that I feel followed absolutely from the decision to guarantee normal retail depositors. The clause will allow retrospective ISA regulations to be laid, committing those individuals who withdrew cash from their Northern Rock ISA between 13 and 19 September 2007 to reinvest it in another ISA by 5 April 2008 and restoring the tax advantage that they would otherwise have lost. That is because in that window from 13 to 19 September inclusive, some ISA holders withdrew money from their ISA held with Northern Rock. By withdrawing their funds in cash, those individuals lost their ISA tax advantage for money deposited in 2007-08 and in earlier years.
Under existing ISA rules, if they had wanted to transfer their funds to a different ISA provider and retain their tax advantages, they should have arranged for Northern Rock to transfer their investment to another ISA provider. Before the Government gave that guarantee, I think that it was reasonable for them to presume that Northern Rock might be unable to transfer to another provider, so we are simply compensating for the actions taken at that time. We decided that the need to protect the financial interests of those ISA savers in exceptional circumstances justified a departure from the usual transfer rules. Therefore, on 18 October I announced that the funds that had been withdrawn between 13 and 19 September inclusive could be put back into any cash ISA with any provider by no later than 5 April this year and that the tax advantages would be restored. We announced that we would do so in this way. It was not an attempt to rebuild the retail base; it was a matter of fairness.
The hon. Gentleman asked about the cost to the Exchequer. There will be no tax cost at all, because we are simply restoring a tax advantage that customers already had. I do not have the figures for the overall amount of retail deposits currently in the bank. They will be made available through the business plan in the normal way.