Saving – a foundation of a civilised and progressive society

When we did not reach my Treasury question yesterday — What assessment he has made of the effect of sustained low interest rates on incentives to save; and if he will make a statement. — I asked the supplementary in a topical:

Steve Baker (Wycombe) (Con): There is no doubt that low interest rates have played a crucial part in the Chancellor’s long-term economic plan and brought about today’s widely welcomed news, but low rates will not be good news for those people who have worked hard, done the right thing and now wish to see a safe return on their cash. Will he explain to the House and to savers in my constituency what he is doing to promote their interests by supporting saving?

Mr Osborne: My hon. Friend is absolutely right that the low interest rates put in place by the independent Bank of England have made life more difficult for savers, although, of course, the growing economy is good news for savers as well as borrowers. My hon. Friend has warmly supported what we have done in the Budget, not only to give people access to their pension pots but to introduce the new ISA. We have also introduced the new savings bond for pensioners, which will come into effect at the end of the year, with higher interest rates to help those in his constituency who have worked hard and saved hard.

Older people who are dependent on savings income, who diligently provided for themselves, urgently need those higher rates just as the deeply indebted will suffer as rates rise. It’s quite a corner our society has been backed into by the independent Bank of England, for it is they who steer interest rates.

Is our long-term prosperity to be found in debt-funded immediate consumption or in saving to invest in productive activity? To ask the question is to answer it and yet today’s economists have led us in a direction which makes no sense to the thoughtful person.

Which reminds me to complete my precis of Economics in One Lesson. In the meantime, the book may be downloaded free here. The Assault on Saving is chapter 23.

Update: Here’s Danny Alexander’s written response to the oral question we did not reach:

Steve Baker: To ask the Chancellor of the Exchequer what assessment he has made of the effect of sustained low interest rates on incentives to save; and if he will make a statement. [903726]

Danny Alexander: Low interest rates have benefited everyone, including through reducing mortgage rates, but the Government recognises that this has made it harder for people’s savings to grow and to secure an adequate income for retirement. The Government believes it is right, therefore, to support hard working people that have taken the long term decisions to save and plan for their future.

The Budget package announced last month aims to help all savers at all stages of life. It reduces tax for the lowest income savers; reforms the ISA regime to give all savers greater flexibility as to where and how they save their money; and creates new products to help retired savers see a better return.

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Comments & Responses

One Response so far.

  1. helen jones says:

    Nothing whatever in the Budget helps the millions of pensioners whose saviings incomes have dived from 16K to 8K solely as a result of FLS

    ISA rates are appalling and mean zero when you below even age allowance
    Pensioner Bond is a joke what good is the interest on £10K its pathetic

    CPI is rigged and bears no relationship to actual cost of living for ordinary people and especially pensioners

    TSC has still not done anything about effects of QE /FLS/HTB on savers

    All in all its only the Rich , the debtors and the Buy to Let merchants who have profited to the immense detriment of millions of pensioners reliant on savings

    B of E is simply following George Osbournes orders ….ROB THE SAVERS BLIND