Government response to Save Our Savers petition
Shortly after our launch in January this year, we published the petition below on the No 10 web site;
We the undersigned petition the Prime Minister to take identifiable and specific measures which will benefit savers and pension funds, thereby encouraging a culture of saving rather than borrowing in the UK.
Despite the clear economic and social benefits of a thriving savings culture, savers have been persistently ignored in their efforts to provide for the future and the UK now faces a worsening savings crisis. The frenzy of spending and borrowing that was a major factor in the collapse of UK banking has hit prudent savers hardest and there is an urgent need to create policies that support saving in the UK.
With the announcement of the election the site was closed to all new petitions and all current ones were immediately put on hold, but in that time we collected 3,110 signatures.Since the election the petition section of The Number 10 web site has remained closed. According to the site this is because it is subject to a review by Martha Lane Fox.
However the Government has today (08/12/10) issued a response….
The Government agrees that over the past decade, economic growth in the UK has been driven by unsustainable levels of debt. This made the UK particularly vulnerable to financial instability. Recent levels of saving have been too low -– around a quarter of households in the UK have no savings.
To turn this around, and ensure a sustainable and balanced economic recovery, the Government will encourage people to save and invest, and create the conditions for higher saving.
Policies to encourage more savers will be measured against the coalition Government’s three principles of Freedom, Fairness and Responsibility, as well as the need to provide lasting affordability and measurable effectiveness.
These principles will guide the Government’s aims of rewarding saving, supporting pensions, and helping vulnerable households to smooth their expenditure.
The Government also wants to foster a culture of personal responsibility. Better financial planning will improve individuals’ independence, particularly in planning for retirement.
The Government will, therefore, examine policies which work with the grain of saving habits, create new expectations of saving and responsible borrowing, and help industry provide simple, transparent, competitive and flexible products.
To this end, in the Budget the Government announced;
- An end to the effective requirement to annuitise pension savings by age 75 from April 2011, giving people more flexibility over the use of their pension savings;
- An annual financial healthcheck, as part of Britain’s first free national financial advice service, from spring 2011;
- That the amount savers can pay into their ISAs each year will increase with inflation –in 2011-12, savers will be able to pay an extra £480 into their ISAs, including an extra £240 into their cash ISAs.
We will publish our response to this next week, but in the meantime, those of you who are not lost for words at the sheer contradiction between the Government’s stated aims and its actions to date – please feel free to leave your comments below….
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What about the fact that the Bank of England seems hell bent on inflating away the country’s debt whilst keeping interest rates as low as possible for as long as possible, effectively rewarding the foolish that overspent and overborrowed (I’m thinking about those who took out unsustainable levels of debt to inadvertently fuel an unsustainable housing bubble) and punishing the shrewd? Putting up the limit for ISAs by a few hundred pounds isn’t going to make up for the fact that the money itself will be worth less.
If the government is serious about encouraging saving, then what needs to be addressed is inflation and interest rates.
What’s more, citing values (indicated by the focus on values like Freedom, Fairness and Responsibility – empty rhetoric) rather than concrete plans doesn’t tackle anything. In fact, it’s insulting.
Recommend (17)
Will’s right. An extra £240 in my cash ISA which is paying out 2.8%? But if inflation is higher than that, I’m actually losing money. So where’s the incentive to save? Inflation needs to be addressed. Unless the BOE shows signs of being serious about inflation – which they’re not, otherwise sterling might be worth more – then there’s no incentive whatsoever to save. In fact they’ve practically begged us to spend it all to jump start the economy. Very transparent. What they want is for savers to withdraw their cash and spend it, and for the debts of overspenders to be eroded away by inflation. In other words, when the country’s economy is up the proverbial creek without a paddle because of overlenders, overborrowers and a government that just sat back and watched (the signals coming from the housing market made it obvious, no matter what Brown says), it’s the savers they turn to to fix it: ‘I say, you lot have got some money saved for a rainy day, would you mind bailing us out of this mess?’
Recommend (8)
A disgraceful and irritating reply from the corrupt cabal that now supervise fairness and equality (or so they claim ) . I am no more disgusted now than I was before this duplicitous tawdry reply . I did not vote LibLabCon at the last election and I strongly advise all readers of this comment to never vote for your natural enemies ie; the LibLabCon oligarchy.
These creeps will connive with the bank of England to inflate your savings away . Wake up people .
Recommend (10)
Will (above comment) has highlighted the most important issue needing to be addressed collectively by the Government, BoE, Office For Budget Responsibility, FSA and all the other relevant agencies that have a finger in the current “economic hiatus pie”.
Until woolly policy statements are supplemented by clear, measurable objectives the bland statements of encouraging and supporting savers will have no influence on the present imbalance between consumption, borrowing and saving which created this mess.
Will the norm for interest and savings rates return in 1, 2 5, or 10 years? Will the mortgage controls proposed by the FSA be implemented or resisted ?
Only with the answer to these and many other similar related specific questions can the responsible savers feel more comfortable in planning their financial futures whilst the feckless and irresponsible will, at long last, feel the necessary pressure to realign their current lifestyle.
Recommend (4)
Give up guys, no one is interested!! I signed this petition hoping like you it would get a responsible response. I also wrote to my member of parliament and he wrote to the treasury. The answer back, after months of waiting, it’s up to the banks what interest rate they give the saver and it is nothing to do with the government, and as for the Bank of England it is independent. So I wrote to the Bank of England, they replied that it was all to do with the longer term picture and that is what they were focusing on, so base would stay at 0.50%. Cop-out after cop-out, so forget it, no one is interested about savers! Especially the Banks, all they want is to get the FSA and the Government of their backs. To do this they need money, so they are very happy to loan out at 10%, whilst only giving savers just 2% , an 8% margin with inflation at 3.2%, nice work if you can get it….
Recommend (13)
I have never seen anything as pitifully feeble as the Government response to the “Save our Savers” petition.
It says that it agrees that over the past decade, economic growth in the UK has been driven by unsustainable levels of debt. This may be part of the truth but the debt was funded and supported by the free market, something that I had understood the government favours over state control. However, it was also caused by a group of banks across the world whose highly paid non-executive directors and auditors (often the UK’s “big four”) failed to understand what valueless debts the banks were buying and continually signed off their accounts without proper scrutiny. The statement would also make a little more sense if the government had not now passed a bill that will ensure that students start work with close to unsustainable levels of debt.
Much of the response is complete gobbledygook but it does state that saving will be encouraged by:
Aims of rewarding saving, supporting pensions, and helping vulnerable households to smooth their expenditure. This from a government that is trying to reduce the rights of those with private and government pensions to receive increases in line with the RPI, thus reducing their value almost every year – just the way to make those still paying into a pension scheme that their future is secure and they can be confident of what their pension will be worth to them
An end to the effective requirement to annuitise pension savings by age 75 from April 2011, giving people more flexibility over the use of their pension savings. How on earth this helps current savers and those who have retired and now rely on their savings in their old age only the Treasury must know. It has also become clear that the detailed arrangements will be such that only the very rich will benefit from this change
An annual financial healthcheck, as part of Britain’s first free national financial advice service, from spring 2011. Excuse me for laughing rather manically over this!
That the amount savers can pay into their ISAs each year will increase with inflation –in 2011-12, savers will be able to pay an extra £480 into their ISAs, including an extra £240 into their cash ISAs. Very helpful when even the best ISAs are currently paying significantly less that the RPI (or even CPI)!
Is there anyone that can respond to this? I really am at a lost to understand whether anyone bothered to read the petition before replying.”
Recommend (9)
14/12/10 – CPI inflation is now 3.3% and RPI inflation 4.7% but expect the the BoE to do nothing about it as they collude with the government’s approach of inflating debt (and your wealth) away.
I’ve forgotten how long it is that they’ve used the excuse that high inflation is “temporary” so there’s no need to do anything about it.
Another weasel-word letter of “explanation” to the government will be on its way soon no doubt.
Apart from complete waffle all we’re offered is a pitiful £480.00 extra ISA allowance.
Recommend (9)
I am a retired Senior Civil Servant and it’s my experience that people who raise awkward questions with ministers don’t get an answer. What they do get is a typically abstruse civil service response that simply restates the government’s position and avoids the underlying issues.
The key point is that the government has chosen to target pensioners and savers because we are unlikely to go onto the streets like students and those higher rate tax payers who might lose child benefit in 2013. Pensioners face CPI indexation rather than RPI; secure inflation linked National Savings certificates have been withdrawn; and the Bank of England is keeping the base rate at a preposterously low level. The cumulative effect of this policy is that pensioners have had their income from savings cut by more than 50% and CPI indexation will reduce pension income by thousands of pounds in the long term. No other section of the community has been targeted in such a cynical fashion. One of the most offensive parts of this strategy is that savers and pensioners are subsidising the cheap mortgages and irresponsible unsecured borrowing that contributed to the financial crisis.
The government has said that we must all share the pain of dealing with the nation’s indebtedness, but plundering savings and pensions means that we are paying much more than our fair share – though we do have free bus passes so I suppose that makes up for it.
Recommend (19)
Oh cry me a river. Pensioners have benefited from the greatest housing boom in history, so much so that now young people cannot afford to buy a house. Pensioners benefited from the sale of utilities, so now our young people are at the mercy of foreign companies for their basic necessities. Pensioners benefited from final salary schemes, which are now too expensive to provide to young people. Pensioners benefited from falling food prices, so the developing countries could give them cheaper goods and now food prices are rising because of the demand from developing countries. Pensioners benefited from an influx of people from developing countries to do the work they didn’t want to do (street cleaning etc) and now the offspring of those immigrants are fighting with the young indigenous population for jobs. Pensioners benefited from the greatest stock market rise in history, and young people are having to take more risks to get similar returns. Pensioners benefited from the dividend taxation allowance which is now too expensive for young people to benefit from.
Recommend (3)
I don’t see many signs of “the young indigenous population” fighting immigrants or their offspring for jobs. There’s plenty of evidence of the idle young preferring to stay at home with parents, living on benefits and handouts, rather than getting on with looking for work. If people from mainland Europe can come to England in their tens of thousands and find work then it’s only sheer idleness that is stopping the same number of young English people from filling the unskilled jobs that foreigners are taking on.
Justin has overlooked the fact that many older people were also victims of the housing booms of the 70s and 80s, and didn’t have the benefit of low interest rates. Older people typically paid mortgage rates of between 8% and 12% for years and it’s their savings that are now subsidising cheap loans and mortgages for Justin’s generation. It’s older tax payers who are paying for the higher education of 50% of his peers, which is far more than the country needs or can afford. If he had had the benefit of a good grounding in modern history he wouldn’t present the current crop of young people as the first victims of economic and social policy; welcome to the real world.
Recommend (16)
Keeping interest rates low and inflation high might diminish the value of savings and keep house prices from crashing (to rectify the boom founded on speculation rather than economic substance), but if homeowners think it’s doing them a favour they’re very wrong.
Just because the price tag on their house hasn’t been reduced significantly since 2007 (dipping in 2008 but regaining the loss in 2009 and 2010) doesn’t mean their house is worth the same. Inflation means that figure is not worth what it used to be. The number on the price tag doesn’t exist in a vacuum.
The difference between simply allowing a crash and inflating debt away is that the latter option also erodes the savings of those who were clever enough not to overborrow,
Recommend (3)
There is no logic in linking savings interest rate to the Bank Rate – which is primarily a rate at which the BofE will lend to banks in an emergency. If the Bank of England had any concern for savers the link could be brought to any end immediately. Competition would raise savers interest to a fasir level.
The banks are very happy to keep things as they are as they make vast profits from the free or near-free balances. Many years ago – before banks mixed together their ‘high street’ operations with their money market, investment magement, etc, activities – between 40% and 60% of total profits came from lending-on the free balances of customers. If you have £1,000 in any account you’ll be lucky to get 0.5% – the bank can lend at anything from 7% to 30%.
That’s a lot of profit if total balances are many. many, billions!
Recommend (3)
If we savers deposit cash with Banks, we are accused of being miserly ( with current rcck-bottom returns eaten away by inflation?)
If we savers invest in company shares we are classed as greedy capitalists.
If we savers spend recklessly, resulting in dependency on the State, we are labelled irresponsible.
If we savers had not been thrifty, paying our taxes and other compulsory levies, we could be called hedonistic and heedless.
My father lost his life fighting for this country. Would that he were alive to judge the critics of those of us who have done all in our power to exercise restraint and take discretionary measures.
Detractors should think, analyse, stop complaining, and summon up the courage to do their duty, both personal and national.
Recommend (2)
Interesting article, but i note two things.
1] The Government does not care what the electors want, they will only do what the people? who control them want?
2] There is plans afoot to try to bring about a dispute between the generations. ” The old divide and rule policy”.
What people do not realise, is that for a global free market economy to work. Democracy must be weakened to the point either people fail to vote, or if they do vote then the difference in parties, is so little that it is a waste of time voting.
You could penalise the bank and its members for its inability to control inflation. By reducing their salaries by the same %point that inflation is above target. This could apply to our MP’s, but Turkeys will not vote for Christmas.
If you think that the Government is trying to reduce the National debt by inflation. Just cast a glance at all the Hedge Funds and Private Equity Companies, that are heavily geared. [up to their eyes in debt]
Think what would happen if MLR %rates rose to 6% which historicaly it should be, if the Bank was free to do its job.
I am not saying that there is a Global Conspiracy. “But if it quacks like a Duck, and it walks like a Duck. Its a Duck”.
Recommend (2)