Interest Rates Debate

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Lord Young of Cookham

Main Page: Lord Young of Cookham (Conservative - Life peer)
Wednesday 23rd September 2020

(4 years, 1 month ago)

Lords Chamber
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Asked by
Lord Young of Cookham Portrait Lord Young of Cookham
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To ask Her Majesty’s Government what assessment they have made of the announcement by National Savings and Investment about reductions in interest rates.

Baroness Penn Portrait Baroness Penn (Con)
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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.

Lord Young of Cookham Portrait Lord Young of Cookham (Con)
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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?

Baroness Penn Portrait Baroness Penn (Con)
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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.