17 June 2010
Saffron Building Society comments on Chancellor speech
Following last night's announcement regarding the effective abolition of the FSA and more regulatory power going to the Bank of England, Saffron Building Society comments on the effects to consumers and building societies.
Andy Golding, chief executive of Saffron Building Society, comments "The Government has stated its desire to shift the focus from indebtedness to savings, but the lowest Bank Rate in over three hundred years makes it difficult to really incentivise savers, especially while mortgage borrowing is so cheap.
"I am strongly of the view that ISAs are a valuable asset to any depositor and it would be really good to see an early commitment by the Coalition Government to keeping Individual Savings Accounts (ISAs) and retaining the real value of the annual subscription limits, or even better applying parity between cash and stocks and shares ISA, so that investors could choose where to place their full subscription according to their risk appetite.
"While the effective removal of the Child Trust Fund was to be expected in an economically challenging environment, I do think that children's savings is of critical importance to teach children to save for the future and because the cost of entry into adult life is unlikely to get cheaper. Therefore I hope that the Government will be open to working with Building Societies to explore other ways that the original aims of the CTF might be delivered.
"Turning to the trading environment for savings providers, I hope that this government will seek to level the playing field, through non aggressive targeting of NS&I and the removal of implicit guarantees for the state owned institutions. In addition with some £350 billion of repayment by institutions of funding from the Credit Guarantee Scheme and Special Liquidity Schemes due in 2011, I am keen to see alternatives sought that will not effectively crucify either the wholesale or retail funding markets; with the obvious knock on effect of further worsening the supply of mortgage finance.
"Additionally I hope that the review of the funding arrangements for the FSCS will take a pragmatic and risk based approach, so that in the future prudently run organisations such as retail funded Building Societies are not disproportionately bailing out more risk orientated institutions, which was clearly the case in 2008.
"Finally I really believe that interest rate should and eventually will have to rise. I hope not excessively, but at least to a point where borrowers pay a sensible price and savers can achieve a reasonable return, especially for those reliant on interest to supplement income. In so doing though I would urge the Government to maintain funding to help financially vulnerable homeowners at risk of losing their home. I think there is a real need to review the effectiveness of current schemes to ensure that there are viable options to keep people in their homes during periods of changed circumstances.
"Through meetings with local MP's and press lobbying Saffron will be addressing all of these points by calling on the Government to encourage savers, and maintain support for mortgage borrowers who may face difficulties either today or in the future."
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