VICTORIA BISCHOFF: Rishi Sunak’s budget is kicking savers while they’re down
Just when you thought things couldn’t get worse for savers, they were dealt two crushing blows in a matter of hours.
The bad news began yesterday morning when the Bank of England revealed it was cutting the base rate by two-thirds to just 0.25 per cent.
True to form, it wasn’t long before banks and building societies responded by slashing their own savings rates and pulling a raft of top deals.
Bank of England Governor Mark Carney, pictured yesterday, slashed interest rates to 0.25 per cent in an effort to support the economy through the coronavirus crisis
Though the move will see savers punished as banks and building societies slash the return on their customer’s cash
Given some major high street banks already pay a miserly 0.05 per cent on their customers’ cash, this is desperately worrying.
It may now be only a matter of time before the rates on some savings accounts drop to zero, leaving savers with little or no chance of protecting their nest eggs against the corroding effects of inflation, and forced to watch as their hard-earned money wastes away.
The second hit came in the afternoon when the Government’s savings arm, National Savings & Investments (NS&I), revealed its funding had been drastically cut.
Each year the Government tells NS&I how much cash it can raise through the sale of Premium Bonds and savings accounts.
By cutting this limit by an astonishing 40 per cent for the next financial year, it means NS&I will almost certainly have to cut its rates in the near future to ensure it does not attract too much money and exceed its target.
This is terrible news for 25 million loyal NS&I savers who were hit with a punishing round of rate cuts only last month.
And when NS&I cuts its rates, banks and building societies almost always swiftly follow suit.
If a Chancellor’s first Budget sets out the Government’s priorities, there can be no doubt that savers are slap bang at the bottom of its list. Money Mail launched its Stop Short-Changing Savers campaign to fight for a fairer deal for the nation’s downtrodden savers.
So we were bitterly disappointed that, despite savers having suffered more than a decade of rock-bottom rates, Mr Sunak couldn’t find it within himself to offer them so much as a word of encouragement or even a hint of incentive – never mind a desperately needed rabbit out of the hat.
The only bit of good news was that the amount families can save into a Junior Isa each year has been more than doubled to £9,000.
But frankly, this will help only the very wealthy who can afford to put away such a large sum for their children.
What about the millions of adult savers desperate for a respectable return on their cash?
In the wake of Black Monday – after the coronavirus caused trading on Wall Street to be suspended temporarily – many will be even more nervous than usual when looking to the stock market for answers. And while investing is important for building up long-term savings and pensions, it is still vital people have a cash cushion for emergencies.
It is entirely understandable, given how much chaos the coronavirus is causing, that this Budget needed to focus on boosting the economy and keeping people spending as much as possible.
But savers haven’t just been ignored, they’ve been kicked while they are down.
The Covid-19 crisis is also a stark reminder of the importance of having a rainy day fund – particularly for self-employed workers.
So you would think that given the startling statistics around how few people have enough money squirrelled away, creating an incentive to save would be beneficial. But for now at least, it looks as though the misery is set to continue.
Or as Rishi might say: ‘Abandon savers? We got it done.’