David Cameron called today for the abolition of income tax on savings by basic-rate taxpayers.
David Cameron called today for the abolition of income tax on savings by basic-rate taxpayers.
And he said that pensioners' tax allowances should be raised by £2,000.
The Conservative leader said the Government could introduce the changes in its spring Budget, covering the estimated £5 billion cost by cutting back on state spending in 2009/10.
The Tory leader said the proposals formed part of the vision for a "good future" for Britain which his party will put forward at the next general election.
Mr Cameron also launched Conservative reports on measures to build the UK's 5% share in the growing market for environmentally-friendly technology, which he said provided "a roadmap of how Britain can be the world leader in green goods, services and companies".
He said that a Conservative government would do everything possible to ensure that the majority of the population has access to high-speed broadband links within five years, with universal access in a decade.
In a speech on the economy in London, Mr Cameron denounced the Government's response to the downturn as "economically stupid and morally indefensible" because it encouraged debt and undermined saving.
"It is economically stupid because it keeps the debt crisis going, so everyone from individual families to the Government to the whole economy continues to be dependent on foreign-financed debt," said Mr Cameron.
"And it is morally indefensible because it punishes future generations - and responsible savers in this generation - for the irresponsibility of others."
His measures to encourage saving could be achieved without affecting spending plans for the NHS, schools, defence or international development by restricting other Whitehall departments to a 1% real-terms increase, he said.
They would encourage the "really big change" required to transform Britain "from a spend, spend, spend society into a save, save, save society", he said.
The Conservative plans would increase a pensioner's annual tax-free income allowance to around £11,000 - from the current £9,030 for 65-74-year-olds and £9,180 for over-75s.
The scheme would be worth up to £400 a year to pensioners with income from savings, who have seen their personal budgets hit by successive cuts in interest rates from the Bank of England.
It comes days ahead of a meeting at which the Bank is expected to reduce the base rate by as much as a percentage point from its current low of 2%.
In recent weeks, high street banks have slashed the interest paid on some popular accounts to as little as 0.1%.
Mr Cameron said the Government's policy of increasing state borrowing to stimulate the economy was making Britain's problems worse. He denounced the temporary 2.5% cut in VAT as "an absolutely criminal waste of money".
He repeated his call for an early election this year, saying: "The longer they're in, the worse it gets. Labour are part of the problem, not part of the solution."
And he echoed US president-elect Barack Obama by promising: "Change is going to come - I hope it's sooner rather than later, but change is going to come."
Mr Cameron turned Mr Brown's "do nothing" jibe at the Tories back against Labour, accusing the Government of failing to respond to Conservative proposals for a £50 billion national loans guarantee scheme.
"Just what is this great economic mobilisation the Prime Minister keeps talking about?" he asked. "As far as I can see, unemployment's going up, repossessions are going up and the economy's going down, with nothing Labour are doing making much difference...
"Gordon Brown's policies for the recession are not working. The recession is getting worse not better.
"Instead of Labour doing nothing effective, they should take up our idea of a self-financing National Loan Guarantee Scheme to help businesses get through these tough times and help keep people in work."
Labour promised a "grim" future of 1970s-style big government, tax rises and a continued debt bubble, said Mr Cameron.
By contrast, Tories were offering a "good future" where the state and citizens would "live within their means, save for a rainy day, waste not and want not".
He insisted he had not ditched his ambitions for a greener and more family-friendly society in the face of the economic crisis, arguing that the Tory vision was for standards of living and quality of life to rise together.
"Our vision of a good future is of a less materialistic country, more concerned with people and our relationships; a contributor society not a consumer society," said Mr Cameron.
The TaxPayers' Alliance pressure group welcomed the Tory proposals.
Chief executive Matthew Elliott said: "Abolishing tax on savings would be a huge help to millions of people who are struggling to make ends meet.
"Savers have done the right thing by setting money aside for a rainy day or their retirement, so there is no way they should be punished with taxes. The Bank of England was right to cut interest rates to help borrowers, but now the Government must help savers out too."
But Labour launched a dossier accusing the Tories of doing nothing to help tackle the global economic challenges.
Chief Secretary to the Treasury Yvette Cooper said: "David Cameron is making empty promises to hide the fact that the Conservatives would do nothing to help the British economy, and once again would turn their backs on the British people in difficult times.
"The cruellest of his empty promises is a loans scheme to business when he also rules out providing the money to fund it.
"The fact is every economy in the world will face real challenges in 2009. That's why it's so important to provide British families and businesses with real help to get through the downturn sooner and stronger.
"Labour is determined to provide real help - including the VAT cut which will save households on average £275 a year, and £60 for every pensioner this month - all opposed by David Cameron.
"David Cameron talks about the 1970s. The truth is the Conservatives are returning to the worst of Thatcherism in the early 80s, with no support for jobs or the economy and cuts in public services as well.
"The Conservatives are repeating their mistakes of the past: if a timely fiscal stimulus of similar scale had been applied at the beginning of the 1990s recession, around 300,000 fewer jobs might have been lost."
Independent economic thinktank the Institute for Fiscal Studies (IFS) warned that, while an effective way of directing money into the pockets of particular groups of savers, the Tory proposals risked reducing growth by cutting the amount of money spent in the economy.
The plans would inflict "a very sharp slowdown in the rate of spending growth" by Whitehall departments whose budgets are not protected, but beneficiaries of the new tax reliefs may choose to save their extra cash rather than spend it, explained IFS deputy director Carl Emmerson.
Mr Emmerson told BBC Radio 4's The World At One: "It is a good way of putting money in certain groups of people's pockets...
"The issue is that the Conservatives are proposing taking money that definitely would have been spent in the economy on public services and putting it in people's pockets. To the extent that those people save that money, it will be taken away from the economy next year."
But shadow chancellor George Osborne said Tories were not proposing to reduce public spending, just to bring forward planned restrictions on its growth by one year.
He told the programme: "We would increase Government spending next year by £25 billion, instead of £30 billion. I think that's a perfectly reasonable saving to make at a time when every family is looking at how they can save money and every business is looking at how they can save money.
"The Government, in the year 2010, is proposing to slow the growth rate of spending. The Government tells us there are £5 billion of efficiency savings we can make in the future.
"The Conservatives are saying let's do that now, let's have prudence now, not wait until after the election, let's use that money to help the innocent victims of Labour's recession - pensioners and the savers who have been penalised by what Gordon Brown has done to the country."
The Tories said the tax relief on savings would be worth up to £7,200 for people with an income of less than £43,875.
Taking questions after his speech, Mr Cameron spoke of the Tories' commitment to set up an Office of Budget Responsibility to track the Government's handling of the economy.
He said: "One of the first tasks we would have is to set the timeframe for getting the budget back to balance and bringing in an independent organisation that would really be able to hold a rod to our backs to make sure that we do it."
Mr Cameron said tackling waste in Government was vital. In office, he would immediately instruct his ministers to weed out waste in each department, he said.
"Any minister that came back with a shocking list to frontline services, we would send them back again to try and find more savings in the back office area," he said.
He added that he would not have split the Home Office in two, saying millions had been spent on "Jack Straw's castle".
Mr Cameron refused to rule out a reshuffle of the shadow cabinet before the next election, telling reporters that they would see a "very powerful top team" at all times.
Asked whether former chancellor Ken Clarke would return to the front benches, Mr Cameron said: "Ken is already involved in helping me out. I like to think I've brought all the big beasts back into my part of the jungle.
"I've got Heseltine advising me on inner cities policy and infrastructure, I've got Stephen Dorrell being very helpful on health ... John Gummer was involved in the environmental work and is still involved."
TUC general secretary Brendan Barber criticised the Tories' plans to axe income tax on savings by basic rate taxpayers.
He said: "The taxpayer will have to shell out £5.4 billion to fund this proposal, which would mostly benefit big banks, the super-rich and tax avoiders.
"It would not create a single new job but would instead add to the dole queues as a result of proposed cuts in public spending.
"We can only spend and work our way out of a recession. Saving alone would simply sink us further into recession."
Liberal Democrat leader Nick Clegg said Mr Cameron was offering "his own fake giveaway".
He said: "Cutting savings tax will mean someone saving £100 will only get an extra 40p a year.
"If David Cameron is going to be taken seriously, he has to identify what cuts he will make. How many fewer police officers will there be on the street and who will have a smaller pension?
"The Liberal Democrats are the only party with a detailed plan on how to put Britain on a green road out of recession. We have set out how we would make big, permanent and fair tax cuts, giving £1,000 in income tax cuts to families on average incomes."
