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Hague: Tax Cuts for Savers will Build a Better Britain

Three weeks ago we completed our spending review, the most detailed review of public expenditure ever undertaken by a party in Opposition. It has been based on the sound Conservative principle that the Government should spend only what the nation can afford.

So we have matched Labour's spending commitments on the NHS and on schools, left their spending totals for vital services such as the police and transport intact, and we've identified £8 billion worth of savings. We've shown exactly where the money for our tax reductions is coming from.

Today, Michael Portillo and I begin the task of telling the British people where our tax reductions will be going. How we will use that money to lift the burden on the pensioners, savers and hard-working families who have been hit hardest by this Government's stealth taxes.

Like our spending reforms, our tax reductions are based on sound Conservative principles. They are designed to encourage individual independence, institutional freedom and social responsibility. In a moment Michael will take you through the details of our proposals.

But first I want to talk about the kind of Britain we want to build, a Britain where it is common sense to offer tax reductions which encourage people to save, a Britain where the overwhelming majority of people who have already paid tax on the income they earn, do not then have to pay tax again when they save that income and earn interest on it.

We want Britain to be a Responsible Society. A society where people and institutions see it as worthwhile to save; a society where people's first instinct is to prepare for the future so that they can provide for themselves and those who depend on them; a society where everyone can afford to save today so that they can live in dignity tomorrow.

It is a radically different society from the one that Gordon Brown is working to create. In his Britain, people's financial independence is undermined, those who plan ahead are penalised and everyone sooner or later is forced to rely on the largesse of the Chancellor because that is the way he likes it. The choice facing our country at the next Election could not be starker.

Re-elect Labour and soon any rational person will think twice before saving for the future, because soon only the very rich will be able to escape from clutches of means testing.

Re-elect Labour and they will continue to stigmatise savings in the same way as they've made a taboo of contributing to private healthcare and private education.

Re-elect Labour and the damage they inflict on the fabric of our society and the performance of our economy will be felt for generations to come.

Already, in less than four years under this Government, the savings ratio - the key measure of how much the nation is saving - has fallen by two-thirds. As a country, we now put aside no more of our wealth than our parents did nearly 40 years ago. This is no accident when you consider the way the Chancellor has treated savers.

First, he chose to take away £5 billion a year from pension funds, his largest single stealth tax on savings. He hoped no one would notice. But millions of tomorrow's pensioners noticed. They rely on these funds for the income they will need to enjoy some independence when they retire. Now they will have to pay in more of their hard-earned money simply to stand still. Many are now thinking, 'why should we bother to save?'

And then there are the millions of today's pensioners who were swept up into means testing through Gordon Brown's Minimum Income Guarantee.

He penalised those who spent their lives putting aside a little extra money each month to make their retirement more comfortable. They now receive the same as those who saved nothing. Belatedly he has tried to make amends through the Pensioner Credit, but at the price of dragging more than half of our pensioners into means testing. They are thinking to themselves, 'why did we bother to save?'

Well, Conservatives understand why savers have bothered and why they should continue to bother. Our society and our economy are stronger when people provide for the future, when families and communities prepare for the long term. There is a difference between living for today and planning for tomorrow and we will help to make that difference pay.

We have already started work on setting some of our institutions and the next generation of our country on the path towards independence and security.

We have put forward plans that will enable every young person entering work to build up a personal retirement fund that will grow over the years as the nation's economy grows.

In recent weeks we have announced how we will use the money raised from transferring the student loans scheme and Channel Four to the private sector to endow our universities, museums and galleries giving them the independence and freedom to safeguard their futures.

Today we will take the next step towards fostering the Responsible Society. We will use a share of the savings we have identified from Government to help those who save for themselves and their families.

It is an endowment to the countless numbers of people who want to plan for the future, who seek security and independence from the state. It will begin to undo the damage that Gordon Brown has done to savings through his tax and social security policies.

Above all, it sends the message loud and clear, that the Conservatives will stand up for those who want to escape from insecurity and lift themselves out of dependency on the state, that we will play our part to bring about a Responsible Society where our institutions and people are as free and secure as the country that is home to them.

It stands in stark contrast to the sticking plaster state offered by Labour, where an inadequate state pension is patched up with the Minimum Income Guarantee, where means testing is the norm, where savings are penalised and families are pushed into relying on benefits, where personal independence is eroded and institutions large and small go cap in hand for funding to Whitehall.

At the next Election we will offer an alternative. A society where people become savers so that they and their families can rely more on one another and less on the Government.

A society where our great institutions have the financial backing to raise their own money rather than always looking to public spending.

A society enriched because saving is rewarded and giving encouraged.

A Responsible Society where duty and responsibility do not begin and end with government and the governed.

The kind of society I was brought up to believe in.

The kind of society I want us all to live in.

The kind of society Britain will become under the next Conservative Government.

I will now turn you over to Michael Portillo who will give you the complete view of how we propose to change the taxation of savings.

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