The Conservatives are considering plans to increase the limit on tax-free individual savings accounts.

Shadow chancellor Oliver Letwin set out the latest in a series of possible tax cuts, this time focussing on savings, on Tuesday.

The consultation exercise is exploring a range of alternatives, although the party has been keen to stress that it is not yet committed to any of them.

Another option under consideration is restoring the pension funds' dividend tax credit abolished by the chancellor amid much criticism from the Tories.

However despite these attacks the £5 billion cost of making the move appears to have ruled it out.

The consultation paper said: "With the public finances in a fragile state, this is a relatively expensive tax change and there may be more cost- effective ways of cutting taxation in a manner that supports saving."

But the move to allow savers to keep more of their funds from the taxman could be a relatively cheap and popular way of using any spare funds in the public finances.

Gordon Brown has pegged the annual tax-free limit on payments into Isas at £7,000 which many savers want to exceed.

Increasing this to £9,000 would cost a Tory chancellor around £100 million per year and benefit huge swathes of middle England voters.

Senior party figures told the Financial Times on Tuesday that the proposal was "one of the more favoured options" being consulted on.

A further means of encouraing savings under consideration is supprting lifetime savings accounts with government funds.

Offering to give £10 of taxpayer's money for every £20 per month saved, would cost up to £500 million per year but could radically increase the attractiveness of putting money away.