Last August the Bank of England launched its Lending for Funding scheme. This meant that banks could borrow money from the BoE at very low cost. This was to encourage banks to invest in business. If they did, they only had to pay 0.25% on their borrowings. That’s right, banks get money at one quarter of one percent; the BoE is virtually giving our money away to the banks so they can lend it back to us at huge borrowing rates. Suppose they don’t lend it back to us? The more they hoard for themselves (or siphon off abroad, I guess) the more they have to pay the BoE – all the way up to 1.5%. And the BoE has set aside £80 billion to shower on the banks. Since August banks have helped themselves to £14billion of this money pile.
So the banks don’t need us savers to deposit any money with them; they are awash with cheap cash already – paid for through our (taxpayers) generosity to them. So if you have been wondering why your interest rates have been dropping like a stone for the last six months – that is why. Banks don’t much need our money so they sure as hell aren’t going to pay us decent interest – a bit (a lot?) less than inflation is fine.
This is bad news for those of us whose lifestyle depends on interest from our savings. But this is triple dip recession and we are all in this together – aren’t we? So savers must make sacrifices like everybody else in order to save the UK economy. But is it stimulating investment and growth? and saving the economy? In the last quarter of 2012 overall bank lending FELL by £2.4billion despite the fact that banks got £9.5billion from the BoE. Lloyds – 40% owned by us - was one of the worst: it got £6billion of our money but lent out £3billion less!
Government politicians say it takes a while for a new scheme to work; I would add that it takes a while for anyone to admit that a scheme has failed – usually until a change of government. Bankers say that either there is a low level of demand for business lending or that the applying businesses don’t have a proper business case for investment. Tosh. There are thousands of businesses complaining that their applications have been turned down and, of those who bother to appeal their decisions, four out of five businesses win their cases against the banks.
So. We - the savers - are paying banks to impoverish us and it isn’t doing the economy any damn good. Ain’t life grand?
