The Governor of the Bank of England has ruled out help for savers hit by “negligible” returns on their savings, warning that moves to reward their prudence would tip the economy back into recession. Sir Meryvn King also suggested that growing household savings rates are one reason for Britain’s recent poor economic performance

Bank of England deputy Charlie Bean says spend, spend to save economy

Interest rates are being held down to discourage savers, financial chief admits

The record low rates help mortgage-holders, particularly on tracker deals, but make life difficult for people who rely on income from savings, many of whom are pensioners. Official statistics suggest borrowers have gained by £26bn, while savers have lost £18bn in reduced interest.

"What we're trying to do by our policy is encourage more spending," Bean told Channel 4 News. "Ideally we'd like to see that in the form of more business spending, but part of the mechanism that might encourage that is having more household spending; so in the short term we want to see households not saving more but spending more."

The deputy governor said: "I think it needs to be said that savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit."

Many of those facing a squeeze because of lower rates were "older households [which] have actually benefited from the fact they've seen capital gains on their houses. "It's very much swings and roundabouts. At the current juncture, savers might be suffering as a result of bank rate being at low levels, but there will be times in the future (as there have been times in the past) when they'll be doing very well out of the fact interest rates are at a relatively high level. I think that's something that savers should bear in mind.

Civil servants are scooping £2million in bonuses each month, despite a pledge by ministers to stamp down on spending.
Whitehall bureaucrats have been handed sums of up to £187,500 – more than the Prime Minister earns in a year – on top of their annual salaries.
Official figures show that in four departments, the cost of performance-related awards to civil servants has actually increased since Labour’s  final year in power.