Darling's first Budget: the main points

The Chancellor's speech in full

Private investors and financial groups today joined forces to attack the Chancellor for failing to increase the allowances for Individual Savings Accounts (Isas) beyond what was promised in last year’s Budget.

This means that from April 6 the maximum amount that can be invested annually in an Isa rises by just £200 to £7,200 - the first time it has been lifted since Isas were introduced in 1999. Within that overall limit the amount that can be put into a cash Isa rises by just £600 to £3,600.

Matthew Carter, mortgage and savings director at Nationwide, the UK’s biggest building society, said: “We are disappointed the Chancellor did not go further in his first Budget to promote savings through Isas.”

A spokesman for Alliance Trust, a savings company, said that if the original £7,000 Isa allowance had been linked to average earnings since 1999, it would now stand at £9,726.

Tax experts also pointed out that the £600 increase in the cash Isa element, though welcome, would not actually translate into many extra pounds in savers’ pockets. Stuart Davies, wealth advisory director at Deloitte, the accountant, said: “For a higher rate taxpayer earning interest of 5 per cent a year, the increase is worth only £12 a year - a saving of £1 a month. For basic rate taxpayers the tax benefit on the extra £600 is worth even less, at just £6 a year.”

There was also criticism of the Chancellor’s changes to Isa rules, which will permit those with cash Isas to switch their money into stocks and shares Isas, but not allow those holding stocks and shares Isas to go into cash. Adrian Coles, director-general of the Building Societies Association, said: “As people near retirement they increasingly seek to reduce the risk to which their retirement savings are exposed. It makes sense for them to increase the balance of cash in their portfolios.”

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