Joe Carlebach is a councillor in Hammersmith and Fulham.
We stand on the verge of another proposed cut in interest rates tomorrow which could yield another historically low rate.
I have no doubt that there are valid and cogent macro economic reasons behind the predicted cut. Good news for the many with variable rate mortgages or those seeking to climb on to the first rung of the housing ladder, assuming of course they can stump up the required deposit and have a good enough salary to qualify. This is also good for many businesses as they will be able to borrow at even more attractively low rates.
However as many of us who regularly pound local ‘beats’ will know, hard working people across the nation are waiting with trepidation to see what happens.
These are people who have always done their best to put something away, no matter how hard this may have been for them. An emergency fund should a job be lost or the family encounter ill health, driven by a desire not to rely on the public purse and benefits. A rainy day fund to be able to literally mend the roof when the sun is shining; a lump sum saved for a child’s further education or simply saving for a holiday or for Christmas.
Past governments of all political colours have urged us to save and with good cause. A healthy economy needs those who borrow and those who spend, we all get that. However we equally need those who save.
Recent years have been painful for small savers with dwindling returns and cash eroded by inflation, all be it at low levels. This has been accepted with remarkably little complaint.
Now many fear that Armageddon is about to arrive. If interest rates are cut, and some economists are predicting a drop to 0.25 per cent or even nought per cent, banks may actually start charging to hold cash deposits. This will mean returns for savers will drop again at best to virtually nothing. It also raises the unwelcome spectre of cash being hoarded in homes ‘under mattresses’ something we have not seen in any significant scale since the great depression of the last century.
The savers who will be hardest hit by a rate reduction will not be those who have expensive tax advisers and accountants. It will not be those who can easily move money in and out of multiple currency accounts or whose brokers can recommend a range of good equities or other asset classes. In fact recent evidence suggests growing numbers of IFA’s (Independent Financial Advisers) have been increasing the wealth criteria for new and existing clients putting their help and advice out of the reach of many small savers.
Our small savers are hard working people of all ages from new parents to pensioners, up and down the land, who are rightly risk averse and conservative (small ‘c’ and quite likely capital ‘C’ too). They have made sacrifices in order to avoid borrowing and strive to live within their means.
It is therefore critical not to over look those who will be most impacted by this historic rate cut, our nation’s small savers.
This is not an excuse for inaction neither is it a suggestion to abandon such a cut if it is absolutely necessary.
It is however a demand to give focussed thought and attention to what help needs be given to the many ordinary citizens who will be hit hardest by this much heralded cut.
These are our nation’s treasured contributors. They are culturally and geographically diverse; they are hard working and conscientious, they are an important rung on the ladder of aspiration and social mobility – they are the back bone of our nation.