Politics – General Election 2015 – Tory Bribe Extended
Tory “Granny Bonds” on Sale for Longer.
Tory Chancellor George Osborne has extended the deadline for the pensioner band for another 3 months. That is, until after the election. The bonds, provided by National Savings and Investments, are backed by the government. They give up to 4% interest over 3 years which is far more than is currently available to savers.
The BBC’s Joe Lynam said; “We knew these pensioner bonds would be popular but few expected them to be this popular. Their arrival three weeks ago has flushed out billions of pounds of cash owned by older people. They’ve found a safe new place to park their money, with incredibly generous rates of interest. The original ceiling of £10bn has been scrapped simply because the (Tory) chancellor and his deputy (Liberal Democrat) Danny Alexander didn’t want to risk the ire of such a key voting demographic who might have missed out on such a lucrative opportunity.
The fact that the newly created window for investing in pensioner bonds closes almost as the general election polls do is a happy coincidence”.
But what is the cost of this Tory policy? The government borrows money at 1.2 % it lends it out at 4%. That is not good economics. There has been another, unexpected, consequence. According to Which? “Our new study indicates that 63 savings accounts, Isas or bonds had their interest rate lowered in the seven days following the launch of the market-leading pensioner bonds by National Savings & Investments on 15 January”. In other words as the Tory policy is going to underwrite more than £10bn in savings there is no longer the need for financial institutions to battle for the savings market. They have slashed their rates for the rest of us. Critics will say that ordinary working-age taxpayers will be subsidising an often wealthy group of pensioners whose homes have multiplied in value and whose company pensions are far more generous than will be the case when younger generations Generation retire.
The Institute for Economic Affairs, criticised the extension of the scheme, arguing that it was distorting the market. “This announcement well and truly proves that we are not all in it together,” said Director General of the Institute for Economic Affairs Mark Littlewood. “Borrowing more expensively than the government needs to is effectively a direct subsidy to wealthy pensioners from the working-age population.” Since when has that bothered a Tory Chancellor? Mr Littlewood went on to say “Pensioner bonds have never been anything other than a gimmick that will benefit pensioners at the expense of the taxpayer, and it beggars belief that the government is prolonging such a foolish policy.”
The Tory Chancellor has said that the cost of extending the scheme would be in the region of “several hundred million of pounds”.
Labour’s shadow Treasury minister Chris Leslie said pensioners had suffered under the coalition thanks to the rise in VAT and changes to age-related personal allowances. “Don’t be surprised if George Osborne, as we get closer to an election, tries to give away all sorts of things when, actually, he is trying to erase the memory of how much he has taken away from pensioners. And he has not said where he is going to get the money for this. What other public services are going to suffer as a result?”
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