Interest Rates

Baroness Kramer Excerpts

Wednesday 23rd September 2020 Lords Chamber

[Baroness Penn (Con)]

My Lords, the noble Lord is correct to say that we need to help those on low incomes to save, so that they have a buffer if they face unexpected financial events. That is why we have introduced Help to Save, a government-backed savings account that offers a 50% bonus on savings of up to £50 a month for those in receipt of working tax credits or universal credit, with a weekly earnings equivalent to at least 16 times the national living wage. Returning to National Savings and Investments, one of the other benefits of NS&I accounts, including Premium Bonds, is the low level of savings, at £25, with which people can start those accounts and access those rates.

[Baroness Kramer (LD) [V]]

My Lords, I have savings products with NS&I and was stunned yesterday morning to get an email announcing savage cuts to its rates. Every bank will now cut its offers in light of the NS&I decision, leaving millions of small savers with essentially zero returns. As the noble Lord, Lord Young, said, the rate cut rests at the door of the Treasury because it sets the funding target for NS&I. Does the Minister accept that this will destroy confidence and make savers even more reluctant to spend? It is an act of self-harm for an economy already in free-fall.

[Baroness Penn (Con)]

My Lords, I disagree with the noble Baroness that the decision on NS&I interest rates will have an impact on interest rates in the wider market. It is partly because NS&I rates were so out of line with the wider market that this decision was taken. I should also point out that the interest rate decision was taken in light of the Government’s net financing target, which was increased from £6 billion to £35 billion in response to the pandemic.