Sir, – Emma Howard’s criticism of the planned Government savings scheme does not stand up. (“One in three can’t afford to benefit from Government’s regressive new investment scheme”, September 5th).
The basic problem is the assumption that money put into a savings or investment scheme is money taken away from poorer households. That might be true if there were a fixed pot of money, with every €1 given to one group meaning €1 less for another. But that isn’t how public finances work. Tax treatment of investment returns, cost-of-living supports and capital markets policy are not necessarily competing for the same money.
That assumption also makes the “regressive” conclusion rather convenient. The article shows that people on lower incomes are less likely to benefit from the scheme. But that is not the same as showing that they are harmed by it.
The article even acknowledges that “it is difficult to fully evaluate how effective the proposed scheme will be”, before nevertheless declaring it definitively regressive and harmful. If its effects cannot yet be properly assessed, surely the same caution should apply to such a strong conclusion.
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There may be good arguments against the scheme. But calling it “regressive” requires more than showing that some people are unlikely to benefit from it. – Yours, etc,
DIARMUID COLLINS,
Clonmacnoise Road,
Dublin 12
Sir, – I read with interest Emma Howard’s article on the proposed Personal Investment Account. While the piece raises valid questions about scheme design, it overlooks some important realities.
It is often missed by commentators that any investment made through the scheme comes from income that has already been taxed, namely a household’s disposable income.
The proposal does not “take” money from anyone. It simply encourages citizens to invest their after-tax earnings. As investments grow, households benefit from compounding, while the resulting gains also generate tax revenues for the State.
Properly designed, this is a policy that can benefit both citizens and the exchequer. Over the long term, a growing pool of invested capital has the potential to generate far greater economic activity, tax revenues and household wealth than savings left in deposit accounts, where inflation steadily erodes purchasing power.
The real challenge facing Ireland is not that too many people invest, but that too few do. – Yours, etc,
ADRIAN MULRYAN WHITE,
Eglinton Park,
Dún Laoghaire
