Tax wheezes please banks and better-off

Tax is at the centre of debate in the run-up to the general election, and again the stress is on tax-saving wheezes.

Such schemes are ever more popular with politicians hard-pressed to find ways to actually cut income tax. It is clear from Neasa MacErlean's examination of the Tories' plan to axe basic- rate tax on savings, on page 8, that this reform would be of little help to the millions of people struggling to save after paying a mortgage and supporting children.

To drive home the reality, bear in mind that the average amount saved in a UK household is a mere £750 - this includes pension money, which would be unaffected. Even assuming £750 in a sav ings account, the most you might earn in interest is £45 a year. The tax on that is £9. Anyone serious about saving can already shelter much more than this in an Individual Savings Account; under the previous Tory government there were Tessas.

There is merit, however, in the Tories' idea of restoring the right of non-taxpaying pensioners to reclaim tax now deducted at source on dividends.

Overall, though, the plan seems to be aimed at the well-heeled and, perhaps, at banks, which would doubtless use it as an excuse to shave interest rates even further.

The Government is said to be considering a wide-rang ing inquiry into the insurance industry if it is re-elected. But inquiries are only as good as the action they produce.

Customers have seen relatively little change from the government-ordered banking inquiry that reported last year. For Barclays, now reporting a 42 per cent profit rise, it has been business as usual.