Lord Young of Cookham
Main Page: Lord Young of Cookham (Conservative - Life peer)(3 years, 11 months ago)
Lords ChamberTo ask Her Majesty’s Government what assessment they have made of the announcement by National Savings and Investment about reductions in interest rates.
Her Majesty’s Treasury set NS&I an annual target of net financing to raise. In July, this was revised from the £6 billion set at the Budget to £35 billion to support the Government’s higher financing requirement. NS&I reviews the interest rates on its products regularly and recommended a reduction in interest rates, with the objective of meeting its financing target, while returning to a more normal market position.
My Lords, I declare my interest as an optimistic holder of Premium Bonds. NS&I’s decision to cut interest rates drastically to near zero was a direct consequence, as my noble friend has just said, of the Government’s net financing target—a devastating decision for millions of savers who find their income decimated, or worse. NS&I is a key source of government borrowing but has a broader mission. I quote from its annual report:
“We want to inspire a stronger savings culture”.
That objective is out of the window. Earlier this year, a decision to reduce interest rates was reversed. Will the Government now enable NS&I to reverse this latest decision before it comes into effect in November?
My Lords, perhaps I should also declare my interest as a holder of NS&I savings products. I can understand people’s disappointment at the rate reductions. I reassure my noble friend that the prize fund rate for Premium Bonds, at 1%, even after the reductions, remains competitive relative to the savings market. I remind him that although NS&I has a remit to encourage a savings culture, it also has to balance that against providing value for money for the taxpayer and its position and effect on the broader financial services sector.