Interest Rates

Lord Flight Excerpts

Wednesday 23rd September 2020 Lords Chamber

[Baroness Penn (Con)]

In effect, customers’ deposits with NS&I are a form of government borrowing and could be interpreted in that way. The increase in the financing remit for NS&I has allowed it to offer those products to many more people without exceeding that remit. However, we have reached a difficult moment whereby it is on track to grossly exceed that remit if action is not taken. However, the Government want to encourage savings and that is why, over recent years, we have taken the vast majority of savers out of paying tax on their savings. We will of course continue to look at what more we can do.

[Lord Flight (Con)]

My Lords, surely NS&I interest rates should roughly reflect market rates for different amounts and terms if government policy is to offer a modest premium over market rates to encourage saving. The proposed cuts look to take NS&I rates below market rates. They are too large and will damage saving. Is wanting to inspire a stronger savings culture still government policy?

[Baroness Penn (Con)]

I assure my noble friend that that is still government policy, but I disagree with him on the fact that the changes to NS&I’s interest rates take it below competitive rates in the market. As I have pointed out, on premium bonds, a 1% prize fund rate is extremely competitive while on a number of other tax-free instant access products, the rates remain in line with the rest of the market.