TSC report criticises Bank policy and QE
The 88-page report on the Budget 2012 warned that quantitative easing and low interest rates had adversely hit savers and pensioners.
The report, that followed an inquiry with evidence from chancellor George Osborne, Mervyn King, governor of the Bank of England and lobby groups such as Saga and the National Association of Pension Funds, recommended that the government consider measures to mitigate the effects of quantitative easing.
It said: “Loose monetary policy, achieved through quantitative easing and low interest rates, has redistributional effects, particularly penalising savers, those with drawdown pensions and those retiring now.
“The Bank has argued that some of those effects may be mitigated by the increase in asset prices stimulated by quantitative easing. While the aggregate of savers and pensioners may have received some benefit from higher asset prices, there will be many individuals who will not have benefited.
“The Bank, after, where appropriate, consultation with the Treasury, should provide its estimate of the overall benefit and loss to pensioners and savers from quantitative easing.”
The report described monetary policy as lax. It said: “Under this policy, savers receive a far lower return on their savings than under more normal conditions.”
The select committee’s comments were backed by lobby group Save Our Savers. Simon Rose, spokesman for the group, said: “It is a bitter irony of the current situation that, had savings been properly encouraged in the past, the effects of the financial crisis would have been considerably less severe.
“One the one hand the government is trying to encourage young people to save into pensions. Yet, at the same time, savings are being confiscated through the Bank’s policy of negative real interest rates and quantitative easing, which has had an appalling effect for those who are retiring.”
David Brunning, managing director of Kent-based Brunning Newman Houghton, said: “Out of everybody the elderly prudent are feeling the hardest hit. There are some good reasons for changes that have taken place in the Budget but elderly people are feeling the pinch and are not happy about it.
“A lot of our elderly wealthy clients are not too fussed. It is more those ‘middle earners’ who have saved and hoped their savings would help with their income who are unhappy.”