Fiddle hidden in the small print

THE move to pickpocket the policies of 10million savers is the worst kind of sneaky attack a Chancellor can make.

It’s a classic stealth raid – taking a few pounds from millions of people who would otherwise have taken years to notice.

Had it not been spotted by an eagle-eyed accountant at insurer Royal London it could have been some time before anyone actually noticed the difference.

Mandarins in Whitehall should be uneasy about this type of fiscal fiddle. The public don’t like having the wool pulled over their eyes.

Treasury wonks weren’t even honest enough to call it what it was in the Red Book of policy decisions. Instead it was deceitfully titled ‘Corporation Tax: freeze indexation allowance from January 2018’.

Even a longer note on the change doesn’t lay bare that this affects families up and down Britain who have been responsibly stashing money away for their futures, at a time when the population is failing to save enough as it is. Normally when someone puts into an endowment or whole-of-life savings plan annual investment profits are taxable. However, each year insurers are allowed to deduct rises that only match the increase in the cost of living – so if the policy grows by 3 per cent, and inflation is 3 per cent, there is no tax to pay.

The Chancellor’s policy change scraps this principle. From now on all investment gains will be taxed. It will take around £50 a year from 10million savers.

The particularly iniquitous part of this policy is that it is insurers who pay the tax bill – after deducting it from customers’ policies. So all savers will know is that the value of their investment is smaller than they would otherwise have hoped. They’ll never really appreciate how much they’ve lost out.

Just like the Treasury’s last stealth raid – on insurance premium tax, another policy that takes a few pounds from millions of people – this is no small beer. In the first year alone it will bring in up to £30million. By 2022, it will have amounted to £1.77billion.

Philip Hammond’s Budget had gone a long way to restoring the confidence of the electorate. With this underhand raid, he may have underdone all his efforts.