Dear Chancellor: Stop taxing savers’ losses

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Following the recent Bank of England quarterly report on inflation, most analysts suggest that it will be 2013 before we can expect base rate to move upwards from its record low of 0.5%. After 30 months at 0.5%, it seems likely that savers face at least another 16 months of misery.

The Bank of England believes that, in the medium term, inflation will move just below the Government’s 2% target. However, for over two years the Bank’s predications have been about as accurate as the Met Office’s long range weather forecasts, consistently underestimating inflation and overestimating growth.

In line with most predictions, even the Bank believes that CPI inflation will touch 5% soon, worsening the negative real interest rates suffered by savers. It really sticks in the throat that the prudent members of society, who want to save for their future or who have to live off the savings they built up, are effectively having their money stolen.

What is truly iniquitous, however, is that savers are not only losing money to the ravages of inflation, but also having to pay tax on their losses in the form of income tax on savings income. How can that possibly be fair?

Our letter to the Chancellor

We have therefore written to the Chancellor and asked him to suspend savings income tax until such a time as positive real interest rates return.

When in opposition, he promised: “While the Prime Minister may have forgotten about Britain’s savers, the Conservatives have not. We will take action to help.” It wasn’t his view alone. David Cameron said: “We need to make a really big change: from an economy built on debt to an economy built on savings.”

Far from encouraging savings, the Coalition government’s policies have worked against savers’ interests and have helped borrowers. We live in extraordinary financial times but, with two-thirds of our GDP supposedly generated by consumer spending, the Government is desperate to find a way of boosting consumer confidence. A moratorium on income tax on savings income would, we believe, give an indication that the government really does care about savers and be a fillip to confidence. Without such a move, and with the prospect of low interest rates and higher inflation stretching into 2013, would it be any surprise if increasingly desperate savers were tempted to take greater risks with their money?

Time for Action

We need your help. Write to your MP and make them aware of our call. Point out to them that Britain’s savers, so vital to the economy, are losing £60 billion each year because inflation is so much higher than interest rates. Explain how unfair it is that income tax should be levied on savings income when savers are losing so much of their capital.

Make your letter or email personal so your MP understands the true plight of savers. We are not statistics in the Bank of England’s latest inflation report. We are individuals and MPs of all stripes need to understand the devastating effect of current policies.

Also sign the Government  e-petition

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10 Comments

1. Frances

   August 17, 2011 at 11:46 pm

   Its totally crazy and extremely insulting that Banks are offering Mortgages at 1.95% whilst robbing the savers of a decent interest rate
   Without savers there is no money to lend and its precisely the ridiculously low mortgage rates and special offers to people who had no hope of repaying the loans along with Gordon Brown removing controls on the Banks that led to the mess this Country is in

   To continue punishing savers who certainly have done absolutely nothing to create the problem is totally and utterly out of order ..

   George Osbourne and David Cameron must be made to honour their pledge and treat savers correctly

   Not taxing interest savers recieve would at least be a start

   Recommend (9)
2. Lynda

   August 18, 2011 at 3:44 pm

   I very much agree with previous comments. If you look at bank profits, bonus payments and other perks – we can see why savings interest is so low…..!!

   Successive governments have not controlled the banks – result = taxpayers bail them out and then we all have to tighten our belts.

   Come on Cameron & CLegg – give something back to those of us who keep the banks afloat – relieve us of the tax burden on our savings – given the low rates it is not much to ask of you.

   Recommend (6)
3. Annie

   August 18, 2011 at 4:29 pm

   Well done and thank you for the e-petition, I was signatory No 11 !

   Recommend (2)
4. Brian John Griffiths

   August 18, 2011 at 6:46 pm

   I congratulate you on commencing the e-petition and am glad to have been amongst the first ten to sign it. Your timing is excellent as Sky News were today talking about the Bank of England possibly having to reduce base rate to 0.25% due to the “state of the economy.” Ridiculous!
   If this campaign can find its way into the national media I believe there is a chance that you will receive enough signatures to catch the Government’s eye, even if the 100,000 is not quite reached. I wish you well.

   Recommend (7)
5. Karen Bryan

   August 20, 2011 at 9:03 am

   I’m writing a post for my site linking to this article and to the e-petition. Is it OK if I use your logo as the image in my article?

   Recommend (0)
6. Jason Riddle

   August 20, 2011 at 9:40 am

   Hi Karen

   Thanks for the offer of support, I’ve emailed the logos to you.

   All the best

   Jason

   Recommend (0)

7. Pingback: Suspend Tax on Savings | Help Me To Save

8. frances

   August 22, 2011 at 7:12 pm

   What is truly galling is Mervyn King and the MPC have done ZERO to address the issue and made no attempt whatever to discuss savers suffereing with the Chancellor

   The only very tiny brief mention of savers plight was in Mervyn Kings speech of 25th January 2011

   That was derisory and is totally irrelevant since much has changed since Jan 25th

   This Government must face the reality of what it has done to savers and the INNOCENT

   Recommend (1)
9. Lynne

   August 23, 2011 at 1:57 pm

   A good idea, but insufficient to restore the buying power of savings. At 10% inflation the value of savings is halved in 7 years. You simply divide the inflation figure into 70. Retirees are being attacked from all angles. If Obama’s adviser – Ezekiel Emmanuel gets his ‘complete lives’ agenda into the UK, the next stop will be euthanasia

   http://www.youtube.com/watch?v=V8Q2M_Qv30A

   Recommend (0)
10. RJT

    August 25, 2011 at 1:30 pm

    I can understand everyones anger on effectively being robbed, but the *ONLY* way to get a better rate on savings is to co-ordinate mass withdrawals into a high interest paying account. Maybe an offshore or foreign owned bank could do something if enough savers can get together and offer a huge sum collectively (it worked in the past in the UK and in Norway), but writing letters to the chancellor and organizing protests will not achieve results.

    I’ll state it again: the *ONLY* way to get a better rate on savings would be the threat of a mass withdrawal (preferably to another bank which can offer better rates with a large collective sum). Protests and letters will not work and in the meantime your savings will keep on eroding.

    Recommend (3)