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BSA Budget Submission calls on Chancellor to support savers as well as borrowers

BSA Budget Submission calls on Chancellor to support savers as well as borrowers

In its Budget Submission made to HM Treasury today, the Building Societies Association (BSA), calls on the Chancellor to provide more support to savers as well as borrowers. Savers in particular have been experiencing the perfect storm of an all time low bank rate, coupled with relatively high inflation. This has led to real hardship for many who rely on their savings for income.

With the bank rate now approaching its third anniversary of being static at 0.5%, building societies and other mutuals have little room for manoeuvre on savings rates for their many savings customers.

Some relief could easily be provided by the Chancellor if he removed the restriction on the amount of the total ISA allowance that can be saved in a cash ISA. It seems illogical for this limit to be set at half the overall annual allowance, giving those nervous of stocks and shares access to only half of their annual ISA allowance.

Similarly, the BSA wants to see transfers permitted from stocks and shares ISAs to cash ISAs. At present transfers are only permitted in the opposite direction. This change would make adult ISAs consistent with the new Junior ISA. It would allow savers, particularly those approaching retirement, to transfer into less volatile cash investments, protecting their nest egg.

For borrowers, the BSA believes that the slab structure of Stamp Duty continues to cause market distortions which are particularly unhelpful in such a fragile market. The structure could remove distortions by charging stamp duty on a marginal system similar to income tax and rates could be set to ensure that there is no net effect on tax revenue.

The removal of the Stamp Duty holiday for first time buyers on properties of £250,000 or less is also unhelpful. Even though in isolation it will not promote a revival in first time buyer purchases, psychologically its removal may have a far greater negative impact on consumer sentiment.

Commenting, BSA Director-General, Adrian Coles said: "We're calling today for the Chancellor to make small changes via the Budget that will give some assistance to millions of savers in the UK.

"Whilst the lower for longer bank rate environment has been a boon to existing mortgage borrowers, it has effectively delivered a kick in the teeth to savers. Plus it has reduced the flow of mortgage funds for new borrowers and been a business challenge too. In an ideal world we'd like to see the bank rate move up a little when the economic timing is right. But we are aware of the potential repayment problems that this might cause some borrowers as mortgage costs rise. So the message on base rates is no sudden shocks please."

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Contact
Hilary McVitty
Tel: 020 7520 5926
Email: hilary.mcvitty@bsa.org.uk

Notes for editors

1. The Building Societies Association (BSA) represents mutual lenders and deposit takers in the UK including all 47 UK building societies. Mutual lenders and deposit takers have total assets of over £375 billion and, together with their subsidiaries, hold residential mortgages of nearly £240 billion, 19% of the total outstanding in the UK. They hold more than £250 billion of retail deposits, accounting for 22% of all such deposits in the UK. Mutual deposit takers account for 34% of cash ISA balances. They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.
2. The BSA 2012 Budget Submission can be viewed here – http://www.bsa.org.uk/policy/response/2012_Budget_Submission.htm

3. Photographs of Adrian Coles are available from the BSA press office, or from the Association's website at www.bsa.org.uk or Headlinemoney www.headlinemoney.co.uk

Katie Wise
Policy and External Affairs Officer
Building Societies Association
6th Floor, York House
23 Kingsway
London
WC2B 6UJ

Tel: 020 7520 5904
Email: katie.wise@bsa.org.uk
Web: www.bsa.org.uk
Twitter: @BSABuildingSocs