Newspaper article The Evening Standard (London, England)

National Savings' Day Has Arrived; CITY COMMENT

Newspaper article The Evening Standard (London, England)

National Savings' Day Has Arrived; CITY COMMENT

Article excerpt

Byline: Anthony Hilton

THE latest issue of National Savings Certificates was described in a press release yesterday as "a great deal for customers, but a kick in the teeth for competitors".

Something of an extreme comment but one which does point to an unusual problem for businesses in the state sector -- National Savings and Investments is in effect under strict orders not to be too successful. Government does not want to be accused of competing unfairly or not with the rest of the private savings sector. So National Savings operates under two constraints. First, it has to make sure that it only provides funds for Government when it is sure it can attract the money at a lower cost than if the Government were to sell the equivalent amount of gilts in the market in the normal way. Second, it has to pitch its offers and set caps on the amount of any issue which an individual can hold, so that it does not seriously undercut alternative homes for savings in building societies and elsewhere. It is therefore expected to punch its weight but with both hands tied behind its back.

Arguably this all worked -- or at least had a degree of logic -- in the pre-credit crunch world but one wonders how sustainable it is now. The shocks of recent months taught people not to have total confidence in the everlasting nature of banks, even though they now all have their deposits protected by government guarantee. At the height of the crisis money poured into NS & I at an unprecedented rate, because it was seen -- and still is seen -- to be a safe haven in an uncertain world. There is still a huge demand for such certainty and logically the organisation ought to be able to capitalise on this in order to attract as much money as it likes. Competitors might not like it but it is their own fault that they are at a disadvantage, so why should we have sympathy? Banks and, to a lesser extent, building societies brought their woes down upon themselves. …

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