The next government will face major challenges, but will Green ISAs solve anything?
In a speech published on Tuesday, shadow chancellor George Osborne touched on the subject of Individual Savings Accounts (ISAs).
Now, ISAs are very Foolish things indeed. For the 2009/10 tax year, people under the age of 50 can invest up to £7,200 (of which £3,600 can be in cash), and then take all subsequent profit (be it interest, dividends or capital gains) completely free of tax. And for oldies like me, aged 50 or over on 5th April 2010, the limit is £10,200 (£5,100 in cash).
So what was Mr Osborne announcing? That, if the Conservatives win the next general election, they'll increase the ISA allowances by a generous amount, thus helping support the Conservative ideal of a nation of self-sufficient pensioners?
A green what?
Nope, he just re-iterated some stuff he spouted last year, about introducing a "Green ISA", and told us that they would be a priority for any increase in ISA limits. A Green ISA, apparently, will be a savings vehicle in which the invested money will be channelled towards environmentally cute causes.
But at a time when the country is looking for strong leadership on the issues of climate change and of securing our financial futures, this is a limp idea on so many counts.
Climate change and personal investment are two entirely separate concerns, and there is no reason to connect them in this way. Most experts and politicians seem to agree that something drastic needs to be done about climate change. Now, I'm no expert, so I'm not going to try to judge that, but if major action is needed, green ISAs are going to make a tiny percentage of no difference at all.
There are better ways
If, as individuals, we want to make a difference, things like leaving the car at home and walking more, taking fewer carbon-hungry holiday flights, and eating fewer burgers (all that cow-generated methane is nasty stuff), will make far more of a difference than putting our savings into an investment product whose green credentials will be very hard to ascertain, as any ethical investor who has tried to unravel the lengthy chains of ownership and cross-holdings that make up today's capitalist economy will surely attest.
So to the shadow chancellor I say give up on gimmicks and sound bites. We've had enough of that. Regardless of who is in charge after the next election, we just want them to address individual issues from the viewpoint of those issues themselves. Keep it simple and it will be much more effective.
Keep them separate
Tell us what you plan to do about climate change by all means, but please don't forget your free-market credentials. If you want us to invest in greener companies, come up with ideas to make those companies more profitable so that we'll actually want to put our money into them, rather than inventing "tail wags dog" products. And if you want us to save and invest more, increase the limits for all ISAs -- and leave us to decide where best to put our money.
And to those individuals who wish to invest for your futures but are also concerned about environmental issues, you'll achieve much more by separating the two issues. Cut your personal carbon footprint directly if you are so inclined, but focus your investments on the only thing that matters -- getting the best return.
And while you're waiting to find out who our next government will be, be sure to use up as much of your 2009/10 ISA allowance as you possibly can. You've only got a few months left, and the potentially expensive festive season may well hinder your savings plans, but the strings-free tax savings to be had are well worth the effort.
Now, where can I find another three grand to make up my £10,200 allowance for this year?
More from Alan Oscroft:
> Don't forget that you can open a self-select ISA with The Motley Fool Share Dealing service.
