As this weeks budget approaches, I am forced to reflect that this month also marks the fifth anniversary of record low Bank of England base rates.
Now I understand that the last shower of shit laughingly referred to as a ‘government’ left this country in the crapper. The spend, spend, spend philosophy of Gordon the Gobbler’s fiscal policy need drastic action to dig us out again and there are signs that this is, at last, starting to work and is reflected in the growth forecasts for the next few years.
Since 2010, the private sector has created 1.6 million new jobs and inflation appears to have been brought under control. The banks are looking somewhat less shaky and lending is starting to happen once more. House prices are recovering. All very encouraging.
I realise that money is tight and that low interest rates have helped young working families to stretch their money primarily by keeping their mortgage repayments low and leaving more money in their pockets to spend and help the economy. Also, business have been helped with the cost of borrowing for investment which has in turn created more jobs and so the cycle goes on around.
But during this time, the government has failed the older generation. We focus all the time on the plight of the youth unemployed whilst ignoring the fact that unemployment amongst the over 50s is growing at three times the rate as unemployment in the under 25s. It seems that both are equally important.
The same dichotomy occurs when we look at interest rates. Yes, it’s important to help young families with mortgages but by cutting the interest rates we penalise the elderly who rely on the interest on their savings to finance their retirement.
I retired ten years ago, admittedly at a fairly young age. I was self employed for over 20 years so I have no company pension fund to rely on and am not yet old enough to get the laughable pittance known as the ‘state pension’. I sold my house and bought a smaller on in a cheaper part of the country. The money I released was placed in various banks and financial institutions to generate an income.
When I retired, I could place money on one year fixed term deposit at around 6-7%. A year ago I was lucky to get 3% and since the government started its ‘funding for lending’ program and the banks don’t need my money I’m now lucky to get anywhere near 2%. In general terms this means that my income is now about 1 third of what to used to be.
Mark Carney said last week that he thought interest rates would most likely slowly rise to about 3% in around 3 years time. When this happens, there will no doubt be moans and bleats from all the borrowers out there and great shrieks of protest from the Limp Dumps and the Labour Party. Not a word will be said on behalf of the poor bloody pensioners.
I’m not advocating a ‘fuck the youngsters – I’m alright’ policy but I am saying that there are two sides to this coin. I’m prepared to accept that I earn a little less so they can save a little more, but there has to be balance and consideration for all parties concerned.
Politicians need to remember that it is the older generations that are most likely to go to the polls and if they don’t address this balancing act, it will come back and bite them…