Encourage savers, Building Societies Associations urges UK govt

Written by Ray Clancy

Friday, 11 June 2010 08:19

Ahead of the upcoming UK Emergency Budget, the Building Societies Association has written to the Chancellor of the Exchequer highlighting the issues that face savers and borrowers in the current economic environment.

Adrian Coles, director general of the BSA said that the backdrop to the Emergency Budget is one of highly challenging economic conditions as the Government seeks to shift focus from indebtedness to savings.

‘The lowest Bank Rate in over three hundred years makes it difficult to attract retail deposits and in turn this has compounded the difficult issues faced by all institutions in accessing the wholesale markets. We are calling upon the Government to encourage savers and maintain support for mortgage borrowers who may face difficulties in today’s austere environment,’ he said.

He explained that it would be extremely helpful to have an early commitment by the Coalition Government to keeping Individual Savings Accounts (ISAs) and to, at least, retaining the real value of the annual subscription limits. ‘We would like to see two-way transfers of ISAs, so that stocks and shares ISAs can be transferred to the cash product, as well as vice versa,’ he said.

Coles also hopes that ministers will be open to working with the financial industry to explore other ways that the original aim of Child Trust Funds might be delivers. ‘Whilst the removal of Government support is not unexpected, we believe the true value of the CTF, promoting financial capability in the next generation, would only have been seen over the long term,’ he explained.

The BSA is also calling upon the Government to carefully assess whether and how the aggregate plans for repayment by all institutions of funding from the Credit Guarantee Scheme and Special Liquidity Schemes are consistent with the likely overall size of the wholesale and retail markets. ‘We believe there is a danger of significant strain that could lead to further disruption to both mortgages and savings and that the Government should review the current repayment programme,’ said Coles.

In the property world attention need to be paid to maintain funding to help financially vulnerable homeowners at risk of losing their home. ‘We believe there is a real need to review the effectiveness of current schemes and commence a redevelopment of the public and private sector safety net, which should include revision of the current Support for Mortgage Interest programme. We also believe that the structure of Stamp Duty Land Tax should be reformed as the current system results in the bunching of transactions at prices just below the thresholds for different rates,’ explained Coles.

‘We welcome the support for mutual financial institutions as stated in the Coalition’s Programme for Government. We also note the plan to introduce a levy on banking and stress that should any levy be introduced it should be proportionate to the risk of a bank’s activities or appropriation of excess profits -whether to shareholders or to management,’ he added.