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Leading article: Do not forget the plight of savers

As the tediously moralising Polonius had it in Hamlet,"neither a borrower or a lender be". It is a course that the Government and financial authorities seem determined to promote in the first case and thwart in the second.

Yesterday's one percentage point reduction in interest rates has a single purpose in mind: to ease the cost of borrowing and thus stem, or at least moderate, the slide into recession. It shows, if further demonstration were needed, the perilousness of our present economic situation. The Bank of England, seeing the threat of recession turning into a full-blown depression, has decided to sweep away its concerns about inflation and move as hard and as fast as possible to reflate the economy through interest rate reductions. If the recession continues to gather pace, rates could go down to an astonishing zero per cent, on some predictions.

That is good for borrowers, particularly those with mortgages or business loans tied to the Bank base rate (provided, of course that the banks, struggling with their own balance sheets, pass on the reductions in full). This, together with the action taken by the Government to reduce taxes, increase support for the poor and pressure the banks to go easy on businesses needing cash and house-owners needing help, should at least ease some of the pain, even if it cannot cure the illness.

The problem comes with the other side of the equation: the lender. So far savers and the shareholders have been ignored in this drive to reflate. Yet, over the longer haul, lenders are going to be needed to get the economy growing again. They will be called upon to provide the long-term investments needed by industry. The lower the savings rates, the less inclined people will be to put money aside for the future.

Also, the lower the rates, the worse the situation for those nearing retirement. They are being hit by the double whammy of collapsing share prices and reduced annuity rates.

One of the causes of our present woes is excessive borrowing. For the greater good, it may be necessary to encourage us to keep borrowing in the short term. But for the future, the authorities need to cast a protective eye over the saver and investor too.