David Prosser: Savers welcome back an old friend

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Outlook The reintroduction of index-linked savings certificates yesterday was a welcome (and rare) piece of good news for hard-pressed savers, the often forgotten victims of Britain's unprecedented period of rock bottom interest rates.

With base rates at 0.5 per cent and inflation at 4 to 5 per cent, savers are as much a part of the squeezed middle as families hit by tax rises and spending cuts. Yet last year, National Savings & Investments, the state-backed savings bank, withdrew its index-linked products, which paid a guaranteed, tax-free interest rate of inflation plus a small premium.

It did so because the products were becoming too popular in an era of higher inflation and lower savings rates. NS&I's job is to raise funds for the Government, but these certificates are an expensive way of doing that, so once demand reached a certain point, it was told to shut up shop.

This relaunch is likely to follow a similar pattern, which is a pity. There's a cost for the Government to borrow via this more expensive route, but against that is the benefit of helping out British savers, rather than paying interest to investors, many of them international, on the bond market. Here's hoping NS&I isn't forced to pull this new issue any time soon.