FIDELITY, Britain’s biggest investment company, has launched a full-frontal attack on the government’s beleaguered savings policy.

In an interview with The Sunday Times, Richard Wastcoat, managing director of Fidelity’s £22.4 billion UK funds operation, lambasted ministers for continually meddling with the savings regime and reducing public confidence.

“The government is publicly committed to encouraging people to save, yet it has done more to damage the savings culture in this country than promote it,” he said.

“The government’s policy on savings is a mess and it will take years to repair the damage. If we don’t, the losers in the end will be the very people the government claims to be aiming to help — the public.”

Wastcoat’s criticism is unusual. Fidelity, which has more than 1m customers in Britain, usually prefers to influence policy from behind closed doors.

Since 1997 the government has made a large number of changes to the savings industry. It removed the pensions tax credit in 1997 and in 1999 replaced the tax-free Peps and Tessas regime with Isas. This reduced the amount people could save tax-free from £9,000 a year in Peps and £9,000 over five years in Tessas to £7,000 a year. This April the dividend tax credit on Isas will be removed and in 2006 the government will cut the amount people can save under Isas to just £ 5,000.

Wastcoat said: “These are disastrous decisions. Not simply because of the reduction in the tax advantages but because of the confusing message it sends out to savers.

“It’s a real shame, as while the government had reduced the tax-free savings limits with the Isa regime, it did bring cash and equity savings under one roof. This was a positive step and had started to encourage younger people to make the leap from cash into equities, but there is a real danger we will now see that trend reverse.”

Fidelity said the government had also got it wrong over its decision to adopt the recommendations of Ron Sandler for a new suite of low-cost products.

Wastcoat said: “The government intends to introduce these price-capped products, yet all the evidence is that these products will fail. The time and energy the industry is wasting on this is ludicrous.”

Wastcoat also believes the Financial Services Authority (FSA) needs to adopt a different approach. He said: “The FSA has not been ahead of the curve in terms of dealing with scandals and improving public education and confidence. To achieve this it needs to move away from a box-ticking approach to regulation and become more intuitive.

“Another problem is that there are not enough people with the relevant experience to police this industry within the FSA. The senior management are very competent, but more junior staff are pretty inexperienced.”

Wastcoat’s views are widely supported in the industry. Mike Webb, head of distribution at Invesco Perpetual, said: “We have a lot of sympathy with Fidelity. But we all need to work with the government to build a cohesive long-term strategy on savings.”

Paul Feeney, head of retail at Gartmore, said the problem with the government’s approach was that it did not communicate with the industry. He said: “When initial consultation papers come down from on high they often contain unworkable proposals. It is difficult to see who, if anyone, they have been talking to in the industry before setting down their thoughts.

“The government seems to have decided that the way to close the pensions gap and savings gap is to force the industry to sell unprofitable products and take away all the tax incentives that actually do encourage people to save. We do not understand their objectives.”