The SNP has challenged Rachel Reeves to “scrap, not just delay, the Labour Party’s tax on savers” – amid reports the Chancellor has delayed plans to launch a tax raid on family savings accounts at the spring budget on 26th March.
The temporary U-turn comes after the Labour government had originally planned to slash the cash ISA allowance to around £4000 at the spring budget later this month.
It is reported the Chancellor will now delay the Labour Party’s plans to impose a new tax on savers to the Autumn.
Research from the House of Commons Library, commissioned by the SNP and published last week, revealed over a million Scots hold a cash ISA and could be hit by the Labour government’s tax raid to the tune of hundreds, or thousands, of pounds over the course of the parliamentary term.
With the best cash ISA interest rates currently at 5%, the research shows savers could lose up to £5,132 in interest to tax over a five year period if the allowance is reduced to just £4,000 a year, or up to £6,415 over a five year period if the allowance is scrapped altogether.
The Chancellor’s plans have sparked a backlash from savers, consumer champions and building societies, with research from the Building Societies Association (BSA) showing 73% of the UK’s 14.7 million cash ISA holders oppose the move.
Cash ISAs are among the most popular savings products in Scotland, with a quarter (25%) of Scottish adults holding one, amounting to around 1.12million people.
The SNP commissioned research also revealed the need to help, not hinder, UK households to save.
It found, the UK has one of the worst household savings rates in Europe – with households saving just 2% of their disposable income compared to more than 10% in France, Germany, the Netherlands and Sweden.
In February, consumer champion Martin Lewis told the House of Commons Treasury select committee “I’ve already had people telling me they are worried about what’s going on, so they are going to withdraw from Cash ISAs, which is clearly not the right thing to do.”
He added “I don’t think we should reduce the Cash ISA limit.”
Commenting, SNP Economy spokesperson Dave Doogan MP said:
“It’s clear from this screeching U-turn, the Chancellor has realised just how unpopular the Labour Party’s tax on savers is among voters.
“During the election, the Labour Party promised they would cut the cost of living but, instead, families are paying more as energy and food bills soar, UK inflation rises, and the Labour government imposes austerity cuts on the most vulnerable.
“This pick-pocket Chancellor’s plans to launch a tax raid on the savings accounts of hard working families is another kick in the teeth and it should be scrapped entirely – not just delayed until the autumn.
“The Chancellor must boost, not raid, household incomes and scrap, not just delay, the Labour Party’s tax on savers.
“Instead of leaving families even worse off, the Labour government should be helping families save and protecting the vulnerable by ditching its cuts to disabled people, scrapping the two child benefit cap, and reversing the cuts the winter fuel payment.”
