(3) Savings

Orders of the Day — Ways and Means – in the House of Commons at 12:00 am on 30th March 1971.

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I come next to savings. The Government are pledged to encourage all forms of personal saving, and saving at every level of earnings. There has been a welcome rise in savings recently. Personal savings provide the family with independence and security; and they provide the nation with the funds with which either to increase investment or reduce taxation. A wide diffusion of ownership and savings is an essential part of personal freedom.

We have a highly developed and in many ways sophisticated savings market in this country. The saver has a considerable range of media to choose from, and what seems to me to be important is not so much to add to this already wide range but to improve existing media which have proved their worth, and—perhaps more important—to remove obstacles and disincentives, both general and particular, which discourage savings.

I had these considerations very much in mind in deciding on the changes I have already announced in the capital gains tax and in estate duty.

There are many powerful motives for saving, but two stand out. The first is the desire to provide for old age and for dependants. The changes I have already announced in the tax arrangements for pension schemes will help and encourage this.

The second motive for saving is the desire for home ownership. The stamp duty on mortgages is an extra burden on people setting out to buy their own homes. I therefore propose, with effect from 1st August, to abolish the stamp duty on mortgages together with the related duty on deeds of covenant. The cost will be about £3½million in a full year and £2 million in 1971–72.

Improvements in National Savings were made as soon as we took office, and the performance in recent months has been good. In the six months up to the end of February, the amount remaining invested in National Savings increased by over £200 million, compared with an increase of only £4 million in the corresponding period of the previous financial year.

I now propose some further improvements.

First, Premium Bonds. Starting in August, there will be a monthly prize of £50,000, in addition to the existing weekly prize of £25,000. To make this possible the size of the prize fund will be increased. In addition, the present limit on individual holdings will be increased from £1,250 to £2,000 from 1st April. These changes will make Premium Bonds even more attractive.

Next, Save As You Earn. From September, the upper limit on monthly contributions under S.A.Y.E. contracts will be raised from £10 to £20, and contributors will be allowed to take out more than one contract a year within the new maximum amount. These changes will benefit all the Save As You Earn schemes, and will therefore encourage savings in building societies as well as National Savings.

British Savings Bonds are another way of encouraging stable savings. A new issue of bonds will be on sale on 3rd May, and as an added incentive to savers to hold them to maturity the tax-free bonus payable at the end of five years will be increased from £2 to £3 per cent.

The Decimal Issue of National Savings Certificates announced last July has done well. We shall build on that by increasing the limit on individual holdings from £500 to £1,000 from 1st April.

The success of National Savings depends not only on the Government's decisions, but on the loyalty and enthusiasm of the army of voluntary workers under the leadership of Lord Birsay, the Chairman of the National Savings Committee for Scotland, Sir Robert Bellinger, the Chairman of the National Savings Committee for England and Wales and their colleagues. This voluntary work is of great national importance and I would like to pay my tribute to all those who work for the movement.

The National Savings Movement has developed over a period of 150 years and I believe that the time has come to take a fresh look at the whole system through which the Government offer these services to the small saver. Some of those involved in the National Savings field have made suggestions which raise fundamental questions about the future role of the organisations—the National Savings Movement, the Department for National Savings and the Trustee Savings Banks—and their relationship with the Government and with their competitors. I have therefore decided to appoint an independent committee to examine these matters and to make recommendations to me. It will have wide terms of reference and I am pleased to announce that Sir Harry Page, the retiring City Treasurer of Manchester, has agreed to serve as Chairman. Copies of the terms of reference are being placed in the Library.