Britannia Radio

Osborne does not appear to have a very good grasp of economics when 
he welcomes the cut in Bank Rate and an even worse grasp of 
arithmetic and logic in his tax cut for savers.  For he hasn’t 
understood that when there’s little or no income there will be little 
or no tax to save.

In the news report the general tone - though by no means unanimous - 
is that the cut was futile in that it will achieve noithing 
positive , while killing off any inclination for anyone to save.

On the last point Jeff Randall is scathing.
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CONSERVATIVE HOME Blog        5.2.09
Osborne v Redwood on today's interest rate cut

George Osborne: “The fall in interest rates is welcome and necessary, 
given the increasingly bad economic news. However, it will inevitably 
hit hard millions of savers and pensioners, who are the innocent 
victims of Gordon Brown’s recession. That is why the Conservatives 
are calling for the tax on basic rate savers to be abolished and the 
tax free allowance for pensioners to be increased at the 
Budget.”  [Just a liitle maths exercise for Osborne.  At 0,8% 
interest fairly average today a saver gets £80 a year income on 
£10,000 savings. Tax on this at standard rate is £16,
But note !  A quarter of savings accounts now pay a mere 0.1% . On 
this this interest is £10 and the rax £2.  Some saving, Mr O.
So Osborne thinks that tax saving of £16 compensates for the £150 the 
cuts in bank rate have reduced the saver’s income in the last 2 bank 
rate cuts alone -cs]

John Redwood: "What is it that makes the MPC hate us all so much? In 
2006-8 their decisions meant lots of people would be sacked in 
industry and commerce by keeping rates too high, despite warning. 
They did that well, as forecast. Now they want to bash the savers, by 
almost eliminating interest on deposits. They are doing a great job 
on destroying the savings culture and pushing prudent pensioners into 
poverty. The savings rate will of course go up, as people borrow less 
and it is a net figure. That will merely conceal the pain and anger 
of true savers. Why don’t we put them onto performance pay? That way 
we could avoid paying them anything, as their performance has been so 
poor."
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TELEGRAPH    5.2.09
Interest rates: Bank of England accused of 'assault' on savers
The Bank of England was accused of launching an "assault" on savers 
as it slashed interest rates to a new record low.

Consumer groups and trade bodies expressed anger at the latest 0.5 
per cent reduction, arguing that it penalised savers, while doing 
little to help the majority of borrowers.

They also voiced concerns that with the returns on deposit accounts 
already at a record low, people would be put off saving, further 
reducing the supply of funds available to banks and building 
societies for mortgage lending.

Adrian Coles, director-general of the Building Societies Association, 
said: "The rate cut is an assault on savers who will have seen their 
interest payments drop by 83 per cent since July 2007.
"Savers dependent on interest income have not seen prices fall by a 
similar amount - their lifestyles have taken a significant blow."

He added that savers with building societies outnumbered borrowers by 
nearly eight to one.

The sector has 23 million savers, although there will be some 
duplication in the figure from people who hold accounts with more 
than one society, compared with only 2.9m mortgage customers.

Pensioners, who rely on returns from their savings to supplement 
their income, have been particularly hard hit by the recent interest-
rate slide.

Figures from website Moneynet.co.uk showed that nearly a quarter of 
variable rate savings accounts for balances of £500 currently pay 
returns of 0.1 per cent or less.

The Bank of England also published figures last month which showed 
that in December, interest paid on notice accounts, tax-free ISAs and 
bonds was the lowest since records began in 1995, while the average 
return on instant access accounts was just 0.81 per cent.

The already-low figures do not factor in the impact of January's 0.5 
per cent cut, which was passed on, at least in part, by the majority 
of savings providers.

Andrew Hagger, of Moneynet, said: "Pensioners and those who rely on a 
monthly income from their nest egg to supplement their income are 
being driven to despair as they are increasingly forced to dig into 
their capital just to make ends meet."

He added that with interest rates so low, people should consider 
doing other things with their money, such as repaying debt.

Saga Personal Finance said savers and pensioners were the "innocent 
victims of the credit crunch".

Roger Ramsden, chief executive of Saga Personal Finance, said: 
"Savers have seen interest rates slashed from 5.75 per cent 18 months 
ago to 1 per cent today which has resulted in a significant drop in 
savings incomes.
"For example, someone who invested £20,000 in one of our fixed rate 
bonds last year would have received £115 per month interest after 
tax, however those opening accounts at the new 1 per cent rate from 
today would receive £45 per month.

"The recent rate cuts have had limited effect on the economy other 
than supporting those on variable-rate mortgages.
"The cuts have hit savers hard, particularly those in retirement who 
rely on monthly interest from their savings, this means that the 
effect of the rate cut has been to take money out of the economy as 
people have less interest to spend."

Simon Hodge, an independent financial adviser on Rubii.co.uk, also 
warned that the current "dire returns" on savings accounts could 
tempt pensioners and other cautious savers to put their money into 
riskier investments that were not appropriate for them.

Kevin Mountford, head of banking at moneysupermarket.com, said, "We 
are now getting dangerously close to the point where people will say 
it's just not worth saving.
"Following the rate cut in January we ran a poll of our users which 
found over two-thirds were angered by continuing rate cuts.
"The Government needs to apply some vision and kickstart the savings 
culture - as opposed to killing it."
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TELEGRAPH    6.2.09
We're in denial: afraid to face up to the real causes of recession
An infantilised electorate is encouraged by politicians to blame 
bogeymen, argues Jeff Randall.

     By Jeff Randall

Much has been written about the animosity and interdependence between 
press and politicians. Every self-respecting journalism school has a 
stack of theses on the relationship, many of which seem to conclude, 
in a cruel but fair way, that we're a bunch of untrustworthy rascals 
who deserve each other.

My favourite comment on the matter was penned by Tom Plate, a former 
senior editor at Newsday, the New York newspaper: "Politicians are 
always trying to pimp journalists. And we journalists are always 
seducing and then abandoning them, after we have used them up or 
exposed them." Nice.

Bearing this in mind, it was with some unease on Wednesday that I 
joined four others from our grubby trade to be grilled by a Treasury 
Select Committee on the media's role in the credit crunch. Several of 
its members had been duffed up royally on more than one occasion by 
uncharitable reporters. Who could blame them for exacting a terrible 
revenge?

To the disappointment of those in the gallery hoping for blood and 
guts, it did not turn out that way. The MPs were remarkably 
restrained, even gentlemanly. Their interrogation took the form of 
some slowish leg-side bowling which never threatened the stumps. 
Efforts at blaming the media for the near collapse of Britain's 
banking system were largely half-hearted, as if the accusers didn't 
really believe we had a case to answer.

I doubt the parliamentarians heard anything they did not already 
know. By contrast, onlookers discovered that Michael Fallon MP 
(Conservative, Sevenoaks) suspects that John Kingman, the government 
official who now heads UK Financial Investments, the body created to 
oversee state shareholdings in commercial banks, was the source of 
Robert Peston's BBC scoop about the banks' pleas to Downing Street 
for emergency assistance. Mr Kingman and Mr Peston used to work 
together at the Financial Times.

This allegation, made in the form of a question to Mr Peston (which 
Mr Fallon knew very well would not be answered [but gets it into 
publoic discussion protected by  parliamentary privilege -cs] ), is a 
serious one. It invites us to infer that ministers deliberately 
weakened the banks' bargaining position by leaking details which 
would provoke sharp falls in their share prices. In effect, far from 
shoring up confidence in the banks, the Government plotted to ensure 
that it could take control without unseemly resistance.

We should hear more on this next week, when the committee questions 
Sir Fred Goodwin, the former chief executive of Royal Bank of 
Scotland, Andy Hornby, his counterpart at HBOS, and their respective 
chairmen, Sir Tom McKillop and Lord Stevenson. A former director of 
HBOS told me that his board was disgusted by the way Mr Kingman had 
behaved.

Perhaps it's time for the committee's chairman, John McFall, to cast 
some light on the murk by summoning Mr Kingman to face questions. I 
don't see why not. Mr Kingman is one of the most influential figures 
in British financial services, looking after many billions of 
taxpayers' funds. More than most, he knows where the bodies are 
buried. Yet, beyond a narrow group of Treasury and banking insiders, 
very few people would recognise him.

In recent times, the committee has interviewed a range of groups that 
might plausibly be blamed for the swamp into which our economy is 
sinking. Private equity executives, hedge fund managers, Bank of 
England officials and regulators from the Financial Services 
Authority have been among the possible culprits forced to account for 
their actions. Quite right, too.

There is, however, a missing link. For if too much debt is at the 
heart of the crisis, what about the over-borrowers? What do they have 
to say?
I'm not talking about unfortunate souls who have slipped behind as a 
result of redundancy or family crisis. I'm more interested in Smart 
Alecs who signed for a dozen credit cards and then spent over the 
limits. Or homebuyers who enjoyed a burst of creativity when it came 
to disclosing incomes on mortgage forms. Or heavily geared buy-to-let 
merchants who worked out that instead of paying for a house, they 
could get a house to pay for them.

These and others have played a role in creating the credit crunch. 
But we rarely hear from them or about them. The reason, I fear, is 
that after 12 years of a government which has infantilised the 
electorate by telling it that the state will always provide, there 
has been a shocking diminution of personal responsibility. We are a 
society addicted to victimhood.

As such, when things go wrong, we seek bogeymen rather than face up 
to our own shortcomings. We expect instant, painless solutions to 
self-inflicted problems. Britain's booze culture is blamed on the 
slick advertisements of drinks companies and the cut-price tactics of 
supermarkets. Our obesity epidemic is the fault of junk-food outlets 
and confectionery suppliers. And our personal indebtedness, the 
highest it has ever been, is the result of a pernicious campaign by 
greedy banks to enslave their customers. Oh yes, and the crash was 
caused by beastly Americans.

It is a mindset that is fostered by cynical politicians who see few 
votes in telling people that which discomforts them, even if it's the 
truth. Much better to identify a "dark force" and then roll out an 
initiative to tackle it. This exculpates the guilty, while creating 
an impression of activity.

For example, comprehensive-educated pupils are woefully under-
represented at Oxbridge. The real problem, of course, is poor 
standards at too many state schools. But the dark force, according to 
Gordon Brown and his Yes Man, Ed Balls, is elitism, and their 
initiative to deal with it is to bully our best universities into 
widening access by selectively lowering entry requirements.

In a similar way, we are in denial about the causes of recession and 
therefore cannot face up to the action required to lift us out of it. 
As Niall Ferguson, professor of history at Harvard University, wrote 
in the Financial Times: "The reality being repressed is that the 
western world is suffering a crisis of indebtedness." In which case, 
pumping out yet more debt will not be the answer. It is simply a 
short-term fix that in the long-run creates an even bigger disaster, 
like giving a shivering alcoholic a case of Special Brew.

Yesterday's half-point rate cut was a panic measure from a central 
bank whose excessively loose monetary policy in the first half of 
this decade encouraged a catastrophic borrowing binge. Now, desperate 
to mitigate the consequences of its own failure, it is trying to 
inflate another bubble. In so doing, as Dr Ros Altmann, a former 
adviser to Number 11, points out: "They punish those who actually did 
the right thing [savers], while benefiting the very groups (the banks 
in particular) whose actions caused this mess."
The Treasury Select Committee should give her a call.
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