EDITOR'S LETTERMerryn Somerset Webb
An undeclared tax on savers
This week saw a pretty depressing anniversary: the UK base rate has now been at 0.5% for five long years. Five years is enough time for most people to get used to anything. So it is worth remembering how extraordinary this is. We have records of UK rates going back to the late 1600s, so we know that they have never been this low before.
Interest rates are at 300-year lows. There have been huge winners from this – anyone with a mortgage they shouldn’t really be able to afford, banks, big companies who can easily take out cheap debt, the government (which has been able to keep borrowing at very low rates), and holders of real assets (who have benefited as equity markets have soared).
But there have been all too many losers too. Anyone holding cash has lost substantially in real (after-inflation) terms. Pressure group Save our Savers estimates that keeping rates so far below what is deemed normal (a few percentage points above inflation) has cost the nation’s savers £326bn.
• Read the full editor’s letter here: An undeclared tax on savers.