Savers may have rescued the economy (for now), but they received precious little thanks in return from the chancellor today.
Delivering his Autumn Statement, George Osborne revelled in a positive growth forecast – the first to have been revised upwards during his tenure – insisting that he was right to hold his nerve and that his economic plan was working.
The underlying problem is, however, that a sizeable proportion of this economic growth has come not from businesses but from consumer spending.
Put simply, more people are taking on debt and dipping into their savings – either because they’ve chosen to or because they have no other choice in order to make ends meet.
The markets have been cleverly manipulated to make this happen. The launch of the Funding for Lending Scheme in August 2012 meant that banks no longer needed to offer generous returns on retail deposits. Returns for savers have fallen ever since.
The scheme has kick-started the housing market, boosting confidence and allowing existing owners to release disposable income by remortgaging at lower rates. But the dwindling supply of housing – identified today as a “weakness” by Osborne – has made this unsustainable as soaring house prices flatten the gains in affordability.
The consequential rock-bottom savings rates have prompted many to decide that locking away their cash into long-term investments is barely worthwhile. Rates are down and people have spent what they can scarcely afford to spend – it’s the acute end of monetary policy in action.
But it’s plainly obvious that these areas of growth are not sustainable without generating another consumer debt crisis. So the attention has switched to businesses in a very commercially orientated Autumn Statement.
Business rates will go up by less than expected next year. Small firms will receive a cut of £1,000. Employers who take on young workers will be saved the burden of their National Insurance contribution. All are welcome measures – if nothing particularly startling – to nudge businesses towards further investment to solidify the recovery.
But what of the people who continue to endure the fall in living standards – the people who are continually warned to save responsibly for their future? This nation’s savers were completely ignored in today’s statement, when so many baffling and unfair measures remain.
Why does the Government continue to prioritise risk-based products by allowing twice the tax-free allowance for investment ISAs over their cash equivalent? Why is the travesty surrounding the transfer of poor-performing child trust funds into junior ISAs allowed to rumble on?
Savers have been increasingly overlooked throughout this Parliament when it’s now clear that they have contributed to the largest upwards revision in growth for a decade. The chancellor has got what he wants from savers now that the economy is moving, but he’s moved swiftly on to businesses and it may yet come to bite that he’s left so many to rot.