Clause 2
Finance Bill
11:00 am
David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)
The hon. Gentleman asks a fair question. We would expect amendment 1, in conjunction with new clause 2, which raises the personal allowance for pensioners, to cost £4.1 billion. We could have found the money by reducing the growth rate in public spending for 2009-10. When we produced the policy, the Government were proposing a 3.4 per cent. real-terms increase in the growth rate. We propose restraint, so that increase should be 2.6 per cent. To put it another way, the Government were going to increase public spending from £620 billion to £650 billion and we suggested that, of that £30 billion increase, £5 billion could be used to help savers.
I suspect there is a degree of sympathy across the Committee for a group of people who have, most of us would say, done the right thing by trying to put money aside and provide some independence for themselves, but who have found their income substantially reduced because of falling interest rates. We estimate that savers have lost approximately £22 billion of annual interest income as a result of rate cuts. Let me be clear: we think it was necessary to reduce interest rates—we are not criticising the Monetary Policy Committee of the Bank of England—but people have lost out as a consequence.