Big blow to national saving: Scandal at NS&I threatens a critical source of government funding, says ALEX BRUMMER
Trust in the great state-run financial institutions is at a low ebb. Hard on the heels of the still unresolved Post Office scandal, where many postmasters and postmistresses await compensation, comes scandal at National Savings & Investments (NS&I).
Savers fearful of keeping all their resources on deposit at the banks have come to regard NS&I as a safe guardian of their nest eggs. It also offers a flutter in the shape of very popular Premium Bonds.
The discovery then that up to £470million of deposits, owed to the estates of 37,500 bereaved families, has gone missing is truly shocking.
Delays in probate are hard enough, but to find an arm of HM Government did not bother to trace the savings of deceased individuals is beyond belief.
One must not forget also that NS&I is a critical source of government funding at a time of acute pressure on the public finances.
It is scheduled to raise £13billion in the current fiscal year, taking pressure at the margins off a struggling gilts market where yields are surging.
Savings scandal: NS&I boss Dax Harkins has been axed and will be replaced by former HMRC permanent secretary Sir Jim Harra
At least, on this occasion, there has been rapid action and NS&I boss Dax Harkins has been axed and will be replaced by former HMRC Permanent Secretary Sir Jim Harra. Never has the intervention of a tax collector been so welcome.
Aside from the distress caused to those families which have suffered losses, there is a bigger picture here.
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A loss of faith in NS&I will make it that much harder for the Government to harvest UK savings.
Indeed, in the current troubled geopolitical circumstances it was possible for a robust, well run, and trusted NS&I to make a broader contribution to the national well-being.
In the same way as it has been harnessed to issue green bonds to encourage national investment in climate-change measures, so it could play a role in dealing with Britain’s lack of defence resources.
Having raided the foreign aid budget Labour is out of options in the face of swelling welfare payments (likely to get even larger as fuel bills surge) and continued pressure on NHS resources from rebellious resident doctors.
In past conflicts Britain and other governments have sought to embrace patriotism through war loans or bonds.
For that to happen and work the nation needs to have faith in national savings. That is an option off the table until Jim Harra navigates his way out of an unholy mess.
Debt legacy
As if we needed any reminders the UK’s economy, far from having stabilised under the stewardship of Rachel Reeves, is looking ever more vulnerable.
The latest economic updates from the OECD are truly miserable. The growth projection for this year was slashed by half a percentage point to 0.7 per cent.
Inflation is revised upwards by 1.5 per cent to 4 per cent, the biggest rise of any advanced country and tribute to the Government’s deeply flawed energy policy.
The burden falls most heavily on less well-off households.
Just how debilitating this latest batch of forecasts may be is evident from the market for government bonds.
To convince buyers that gilts are a good deal the nation is paying through the nose. At the latest auction of some £300million of 30-year gilts, the yield popped up to 5.517 per cent, the highest level since 1998.
Earlier this week the yield offered on the ten-year bond was the highest since 2008.
The Debt Management Office boasts that both issues were generously oversubscribed. But the nation’s borrowing costs are ever more foreboding.
Cyber contrast
Marks & Spencer has recovered sufficiently from last year’s devastating cyber-attack for chief executive Stuart Machin to feel confident enough to attack the Government over energy policy, a tax assault damaging retail, and the prospects for young people wanting to climb the career ladder.
Quite a difference with the Labour-supporting Co-operative Group, which has parted company with chief executive Shirine Khoury-Haq and revealed an ever-higher bill for last year’s hack at £285million.
The attack left shelves empty in many of its 2,300 neighbourhood stores. By all accounts, Khoury-Haq’s efforts to shake up the organisation did not go down well with her colleagues.
It’s not easy at the top.
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