In November I wrote a blog castigating Rishi Sunak, the Chancellor, for his introduction of “rip off ” rates for safe savers – many of them pensioners – who have National Savings accounts.
As I said at the time; ” Effectively Rishi Sunak, the Chancellor, is making sure that millions of savers and those who have a flutter on the Premium Bonds subsidise the government’s multi billion pay outs by losing money every year they invest.”
Now thanks to the House of Commons Treasury Select Committee – which took up the issue of the low rates -and also poor customer service, record levels of complaints and long waits hanging on their phone lines – his whole dastardly plot has been exposed.
Mel Stride, Conservative chair of the committee, decided to write to Ian Ackerley, Chief Executive of National Savings and Investments, demanding an explanation.
Today the committee has published his reply with a tough comment from Mr Stride about what happened.
” damage may have been done to NS&I’s reputation”
He said: “An exodus of savers from NS&I when it cut interest rates in November was foreseeable and so it is disappointing that the average time to answer a customer’s call was 19 minutes that month.
“I would like to thank Mr Ackerley for his frank response, but the damage that may have been done to NS&I’s reputation over the last few months is worrying.
“NS&I has a big role to play in helping the Government fund the costs of the coronavirus recovery scheme and it will need to work hard to win back customers.”
But what is really interesting is Mr Ackerley’s explanation of how these changes in interest rates came about.
Ministers took decision not to cut interest rates
After Rishi Sunak became chancellor and pandemic took hold he decided to deliberately to attract savers to get the government out of a spending hole.
As National Savings says:
“In March 2020, in response to the Covid-19 pandemic, HM Treasury asked NS&I to provide proposals for how NS&I could quickly provide additional funding beyond the £6 billion target to support the Government’s increased borrowing requirement. …A proposal was made to Ministers to reverse the decision to implement interest rate reductions to NS&I’s variable rate products that were announced in February (before the Covid-19 pandemic had taken hold) and which were due to come into effect on 1 May 2020. “
“Ministers made the decision to proceed with this plan and on 1 May, only interest rate reductions on NS&I’s fixed term products came into effect. Variable rate product interest rates were left unchanged.”
By September it had been too successful. ” There was unexpectedly more cash in the savings market and much of this money came to NS&I – £38.3 billion in net inflows from March to September 2020 – this was a greater level of Net Financing than in the previous three years combined.”
Plan to drive savers away
So a decision was then made deliberately to drive savers away by introducing rock bottom rates because he no longer needed it.
National Savings said: “Based on previous patterns, we expected that a proportion of customers would withdraw their money. However, as many were newer customers who had come to NS&I when we were offering ‘best buy’ rates, the scale of the outflows and the timing of customers cashing in their holdings happened earlier than expected.
“A combination of factors has impacted our customer service operations which has been stressful for some customers and staff. We did not intend for this to happen but we do not believe that the situation could have been predicted.”
What happened was a rise in complaints, people waiting nearly 20 minutes on the phone to contact them and general disatisfaction with the service.
What is not said though is that the government will not want people to continue saving when the pandemic is over. They will need to spend to revive the economy. What better way to empty savings accounts than to make them so unattractive that people lose money keeping cash there.
So the real story is that this government is deliberately manipulating punters to suit its own interests -putting money away when they can’t spend it during the pandemic – and forcing them to spend it when the pandemic is over. They must take the average saver to be a fool.