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Dear Chancellor: Stop taxing savers’ losses
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