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Why savers must act together
Below I have published a letter sent to the Prime Minister and his Deputy from Sharon Dawe, a member of Saver Our Savers. Below that is a copy of the reply she received.
Dear Mr Cameron and Mr Clegg
I am a fifty year old mobile hairdresser who meets a good cross-section of the general public. What I see saddens, frightens and appals me.
My customers aged fifty plus can no longer afford to have their hair styled regularly. These people are savers, they are not rich people, they have done nothing wrong, indeed, to quote you, Mr Cameron, they have done the right thing. Far from being rewarded they are being robbed by near-zero interest rates, rising inflation and the devalued pound. And they are too old to earn their way back to financial security. They do not wish to tie their modest savings up for years or invest in risky assets.
My customers in their twenties who are newly-qualified people such as doctors and nurses would love to buy a home (not an investment) but they can’t. There is a long-held myth that house prices have been driven by a shortage of property, but cheap money really is the number one cause. We hear a lot about affordable housing which is a euphemism for social housing. These young people who have studied and worked hard do not deserve to be dumped in social housing.
My customers in their thirties and forties have been given the impression that anyone can borrow a couple of million pounds at very low interest rates and in the sound knowledge that they will not actually be required to pay it back. When I have commented that being in debt would worry me the response I receive is ‘Oh, just max out on another credit card. The government wouldn’t dare put up interest rates.’ They have no concept of how serious the deficit is and as for the trouble in Europe – ‘What the hell has it to do with us.’
I didn’t vote in the general election. First, because neither of you held Labour to account for the appalling financial mess in which they left the UK economy and second because you both extolled the virtues of low interest rates and offered no credible plan to deal with the public deficit or the legacy of moral hazard so rife and damaging in our society.
The cheap-money-no-regulation culture of the past thirteen years has completely unbalanced our economy, creating moral hazard of breathtaking proportions and fuelling a boom in house prices (by any measure, houses are over valued), yet just like the Labour party, you are prepared to give the economy more of the same medicine, fighting debt with even more cheap money.
In this respect, Mervin King is equally as culpable as the Labour government. Holding such high office, his defence of having too narrow a remit is simply a copout. Mr King carries gaily on with his quantitative easing and near-zero interest rates justified by such things as ‘spare capacity’. There are many who would argue that this ‘spare capacity’ has gone forever, but hey, any excuse will do.
Northern Rock failed in 2007. Lehman Brothers in 2008. It is now 2010 – does the taxpayer really have to fund yet another committee and wait another year or so for banking reform. I am sure that sifting through the wreckage will take time but retail banking should be addressed now.
Retail banking does need to be split from investment banking and to become boring and responsible again. Why do we need so many mortgage products – it must be an accounting nightmare. A corner shop would not sell tins of baked beans at different prices to different customers. The old model of repayment mortgages over 25 years at three and a half times salary with a ten percent deposit worked well. Lending should be set at interest rates that enable savers to be rewarded, banks to make a profit, borrowers to behave responsibly and to once again encourage a culture of saving.
If such actions caused house prices to fall, would it really be such a bad thing? There would sadly be casualties, but those in their thirties and forties are young enough to earn their way out of negative equity. First-time buyers would return to the market, older home-owners would start moving house again and would welcome the fall in prices to enable their children and grandchildren to buy a home.
I appreciate how important and urgent business lending is. Surely if cheap, silly and irresponsible mortgage products were abolished it would enable special arrangements to be made for business lending.
I am sure that many would call me old-fashioned and say that the world has changed but human nature hasn’t, with its ugly emotions such as greed. How can any government hope to succeed in dealing with our countries problems when it insists in propping up profligate behaviour and failing to instil good values in its citizens. Human nature, moral hazard and fairness should be at the heart of all policy and monetary decisions.
Mr Cameron, Mr Clegg, I am speaking for quite a few people and we are hopeful that you will take the time to reply. We are responsible people, so please do not insult our intelligence with a few well-chosen words of sympathy.
The Reply ….
Dear Mrs Dawe
I am writing on behalf of the Prime Minister and the Deputy Prime Minister to thank you for your letter of 15 May.
It is good of you to get in touch. Both Mr Cameron and Mr Clegg very much appreciate your taking the time and trouble to inform them of your views.
With best wishes.
I’ve removed the name of the civil servant who sent the letter because its not important. What is important, as this letter shows is that they will not even respond to the complaints of an individual saver, let alone change policies to provide better support for savers.
There are some 24 million regular savers in the UK who are entitled to fair treatment, but this won’t happen unless we act together. That is why we formed Save Our Savers.