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National Savings and Investments

Volume 751: debated on Tuesday 14 January 2014


Asked by

To ask Her Majesty’s Government what assessment they have made of the impact of the introduction of a new computer system at National Savings and Investments.

My Lords, National Savings and Investments has been moving customer accounts and investments to a new banking system. That follows a major review which concluded that upgrades were necessary to modernise and simplify NS&I products. It will enable products to be managed online, by telephone or post and ensure long-term customer satisfaction. NS&I recognises that a small number of customers may be frustrated, as is often the case during any such period of change, and has taken measures to ensure that customers understand the reasons for its actions.

My Lords, will the Minister explain why the NS&I cannot be like every other investment house and send to investors, without asking, a half-yearly statement which lists their holdings and the value of those holdings, plus such transactions as have taken place in the previous six months, and eventually produce a total value of all their holdings?

My Lords, I think the correct analogy with NS&I is with a bank or building society, where common practice—this is what NS&I is moving towards—is that people get a statement on the anniversary of when they took out savings and that customers are able to look online for a comprehensive statement of all their various policies and holdings.

My Lords, although we all appreciate that exceptionally low interest rates have been necessary to shore up the finances of borrowers, particularly mortgage holders, does my noble friend recognise that this has been an extremely difficult time for savers? It is a great pity that during a period in which, until today, inflation has been above the Bank of England’s target, National Savings has withdrawn the inflation-linked savings certificate. Will the spokesman encourage National Savings to help to end that misery for savers and, at least for small savers, introduce some new products with rather better rates of interest?

My Lords, as the House is aware, when we have very low interest rates, which have been necessary in the economic circumstances in which we have found ourselves, that helps very many consumers, households, mortgage holders and businesses and is on balance, in our view, beneficial to the economy. The downside, as the noble Lord mentions, is that savers get a lower rate of interest. I think it is unrealistic to expect NS&I to promote products with a higher rate of interest than market rates, because its remit is to get best value for money for the Government, but I am sure that the noble Lord and the whole House will welcome the news that inflation is down to 2%, which is the target level.

My Lords, returning to the original Question, surely the noble Lord, Lord Naseby, is right: NS&I ought to be an exemplar of good practice in informing its investors rather than apparently seeking to catch up.

My Lords, NS&I needs to be able to compete effectively with best practice across the financial services sector. The truth is that NS&I has been behind the curve. It is undertaking a major programme to get all its customers online. Bear in mind that NS&I has 25 million customers in this country. That is a massive operation. When it is finished, it will be able to give information to the standard that people expect from the best of the other high street brands.

Did my noble friend really say that it was the role of National Savings to get the best return for the Government? Surely its role is to provide a safe haven—as it advertises— for savers. Are not the savers getting a poor return because the Government are indulging in quantitative easing, which is a transfer of money from those who have done the right thing to those who have borrowed?

My Lords, the Government are not doing quantitative easing, the Bank of England is. On the rate payable on National Savings, as the noble Lord will know, the role of National Savings is to contribute to the Government’s funding requirements. In doing that it has to operate in line with market rates because otherwise the Government are paying more for their money via National Savings than through the gilts market.

My Lords, does the noble Lord’s answer to the noble Lord, Lord Lamont, mean that the Chancellor is advising the Governor of the Bank of England that if he has early plans to increase interest rates the Chancellor will use the reserve powers given to him under the Bank of England Act to stop it?

My Lords, the reserve powers in the Bank of England Act are to be used principally when inflation is outside the target level. That is not the case at the moment. The question of interest rates is very much a matter for the Bank of England. It has adopted a new policy that incorporates forward guidance, which was agreed with the Chancellor in the middle of last year, and that is the basis on which it is operating.