Why savers must act together

By on June 25, 2010
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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.

Yours Sincerely

Sharon Dawe

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.

Yours sincerely
Mr  xxxx

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.

 

10 Comments

  1. Cllr., Dr. R.D.Feltham

    June 25, 2010 at 12:44 pm

    Thanks for posting that Jason. It really does show again what we have all come to expect from politicians, particularly once they have been elected into power – utter nonchalance, except for what they decide to do. The response confirms my previous claims that the new government will also do nothing to help savers in their present plight, mainly because they and Mervyn King want to use the value they can sequester from savers, as a stealth tax, to help write off some of the deficit left by the previous profligate government. As long as they can keep base rate at 0.5 % they will, and the main reason for that is it keeps the interest rate which the government has to pay on the public debt (via Gilt issues) lower than it would be if the MPC did the job it is paid to do, which it continuously avoids.

    That is why it will be only when we are in a position with sufficient numbers of supporters of SOS so that we can take action together en masse that the government will pay any attention to us. Until then nothing will change.

    I suggest that in the meantime, particularly as Sterling has become a bit stronger, the only action individual savers can take is to move out of Sterling into strong currencies with higher central bank rates. If sufficient savers do that it will hit them where it hurts, particularly since, as Mervyn King has just stated, the banks need to strengthen their balance sheets. In the past they have relied upon getting deposits from savers to do that, but now with the interest rates they offer so as to give a value loss to savers after income tax, it is not likely that more citizens will be persuaded to save and make deposits with them!

    Recommend (0)

  2. Cllr., Dr. R.D.Feltham

    June 25, 2010 at 1:44 pm

    Thanks for posting that Jason. It really does show again what we have all come to expect from politicians, particularly once they have been elected into power – utter nonchalance, except for what they decide to do. The response confirms my previous claims that the new government will also do nothing to help savers in their present plight, mainly because they and Mervyn King want to use the value they can sequester from savers, as a stealth tax, to help write off some of the deficit left by the previous profligate government. As long as they can keep base rate at 0.5 % they will, and the main reason for that is it keeps the interest rate which the government has to pay on the public debt (via Gilt issues) lower than it would be if the MPC did the job it is paid to do, which it continuously avoids.

    That is why it will be only when we are in a position with sufficient numbers of supporters of SOS so that we can take action together en masse that the government will pay any attention to us. Until then nothing will change.

    I suggest that in the meantime, particularly as Sterling has become a bit stronger, the only action individual savers can take is to move out of Sterling into strong currencies with higher central bank rates. If sufficient savers do that it will hit them where it hurts, particularly since, as Mervyn King has just stated, the banks need to strengthen their balance sheets. In the past they have relied upon getting deposits from savers to do that, but now with the interest rates they offer so as to give a value loss to savers after income tax, it is not likely that more citizens will be persuaded to save and make deposits with them!

    Recommend (16)

  3. peter

    June 25, 2010 at 4:24 pm

    With banks offering such low interest rates, I cannot wait for save our savers to start to do anything, I have already started to move my money way before the budget!!!

    Recommend (0)

  4. peter

    June 25, 2010 at 5:24 pm

    With banks offering such low interest rates, I cannot wait for save our savers to start to do anything, I have already started to move my money way before the budget!!!

    Recommend (6)

  5. Barbara

    July 1, 2010 at 2:51 pm

    How do you move your savings into stronger currencies? Someone write an article, please. It would be very hepful.

    Recommend (1)

  6. Barbara

    July 1, 2010 at 3:51 pm

    How do you move your savings into stronger currencies? Someone write an article, please. It would be very hepful.

    Recommend (11)

  7. Barrie Lindsey

    July 2, 2010 at 8:05 pm

    I would like to put my money into an Astralian Dollar account, but I get the impression from the web that you have to be an Australian resident to do so. Don’t know of any other foreign accounts that are safe.

    Recommend (0)

  8. Barrie Lindsey

    July 2, 2010 at 9:05 pm

    I would like to put my money into an Astralian Dollar account, but I get the impression from the web that you have to be an Australian resident to do so. Don’t know of any other foreign accounts that are safe.

    Recommend (2)

  9. The Squeeze

    July 20, 2010 at 4:09 pm

    “How do you move your savings into stronger currencies?”

    There is nothing to stop you buying German government bonds, EDF debt etc through a stockbroker on the fixed income side if you want to earn interest.

    You can buy a currency ETF (although it will charge you at least 0.5% a year rather than pay interest) or just hedge your savings against another currency using a spread bet or cfd – but this can be very risky.

    You should be able to open an account anywhere in the EU as we have freedom of movement of money, but you will have to jump through their bureaucratic hoops.

    Personally I’m buying cautiously managed funds and blue chip shares on the FTSE (a lot of which earn most of their money in forex).

    Recommend (0)

  10. The Squeeze

    July 20, 2010 at 5:09 pm

    “How do you move your savings into stronger currencies?”

    There is nothing to stop you buying German government bonds, EDF debt etc through a stockbroker on the fixed income side if you want to earn interest.

    You can buy a currency ETF (although it will charge you at least 0.5% a year rather than pay interest) or just hedge your savings against another currency using a spread bet or cfd – but this can be very risky.

    You should be able to open an account anywhere in the EU as we have freedom of movement of money, but you will have to jump through their bureaucratic hoops.

    Personally I’m buying cautiously managed funds and blue chip shares on the FTSE (a lot of which earn most of their money in forex).

    Recommend (0)

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