Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what plans he has to help people with savings that have been affected financially by low interest rates since (a) 2020 and (b) the start of the covid-19 outbreak.

The pricing of financial products (including the interest rates offered on savings accounts) is a commercial decision for firms and the government does not seek to intervene in such decisions. Monetary policy, including recent interest rate cuts, is the responsibility of the independent Monetary Policy Committee (MPC) of the Bank of England. The government therefore seeks to avoid commenting on the conduct and effectiveness of monetary policy.

The MPC’s primary objective, as set out in law, is to maintain price stability and its secondary objective is to support the government’s economic policy. The government believes that low and stable inflation is an essential pre-requisite for economic growth; providing certainty for households and businesses, helping them in their day-to-day economic decision making. The MPC is sensitive to the effect of low interest rates on savers and does consider the effect that their decisions may have on all households.

That said, the government is very aware of the challenges faced by savers in the current circumstances and has taken action on a number of fronts. In order to support savers and to reflect the government’s funding requirements during the Covid-19 pandemic, in April 2020 National Savings and Investments (NS&I) reversed planned rate reductions on NS&I’s variable rate products that were due to take effect on 1 May 2020. The government also announced on 1 May 2020 that the Lifetime ISA withdrawal charge will be reduced temporarily to 20% from 25% for any unauthorised withdrawal made between 6 March 2020 and 5 April 2021 recouping the government bonus and any interest or growth that may have accrued on that bonus, but with no further charge. Finally, the government has made significant changes over recent years to the way that income from savings is taxed, as part of its commitment to supporting people of all incomes and at all stages of life to save – this means that around 95% of people with savings income have no tax to pay on that income.