Savers have been punished for too long to help out borrowers, and so they need some relief

News Letter editorial on Monday June 17 2022:

By Editorial
Friday, 17th June 2022, 11:57 am
Updated Friday, 17th June 2022, 12:03 pm
News Letter editorial
News Letter editorial

For fifteen long years, a key component of human behaviour that contributes to an orderly, functioning society has been overlooked.

Saving.

The very idea is almost uncool.

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We hear little about people who work hard over a period of decades, often on modest income, who buy things carefully, and who manage their personal budget to put money aside to provide for themselves in retirement, and their family.

To talk in defence of savings is almost seen as insensitive towards people who are in debt or out of work. Who speaks up for savers? When? Barely anyone, it seems.

A person who had £10,000 in life savings in 2007 would be doing well to have averaged 1.25% net interest per year over that period in the bank. Their lump sum would have risen to perhaps £12,000, or maybe less. But inflation over that time means that the £10,000 would need to have in fact risen to almost £14,000 to be worth as much as it was in 2007.

What this means, in summary, is that savers have paid a massive hidden tax to help keep interest rates low, often to bail out borrowers who irresponsibly took on large and risky debt levels that they were unable to repay.

When will this cycle of low interest rates ever end?

Yesterday the Bank of England lifted interest rates by a paltry 0.25%. Savers will be lucky if they see another 0.1%.

Yet all through these lean years, savers have been stoical.

They knew that the economy was in crisis after the 2008 crash, and then in crisis again over Covid.

But the latest interest rate rise, which is already being criticised, is nowhere near the rate of inflation, which is set to sail past 10%. Who can blame people for wondering if they should instead have enjoyed and blown their money?

There is another factor to consider here too: surging house prices. They make those of us who own homes feel better. But they shut young people on average salaries out of property ownership, and that is both cruel and bad for social harmony.