Aug 27 2012
The Daily Mail
Claims by the Bank of England that pensioners and savers are better off as a result of its controversial money-printing policy were greeted with scorn last night.
Spencer Dale, the Bank’s top economist, said that while pensioners and savers had ‘much to be angry about’, they would have been even worse off if it had not pumped £375billion into the economy.
He even claimed the policy – called Quantitative Easing – had saved the economy from plunging into a deeper recession, with more firms going under and thousands of jobs being lost.
Mr Dale said: ‘The impact of that would have been far-reaching, not just for the spendthrift but for everyone in society including pensioners and savers.’
But his comments were criticised by campaigners, who said pensioners have been particularly hit by QE because annuity rates – which provide those who are retired with an income after they stop working – have been slashed by around a quarter since 2008.
Savers have also seen a stealth reduction in the real value of their deposits due to low interest rates and stubbornly high inflation.
Simon Rose, of campaign group Save Our Savers, said: ‘Most savers have lost out massively. We got into this crisis because of debt and now the Bank is relying on conjuring money out of thin air.
‘The only difference between the Monetary Policy Committee and a bunch of counterfeiters is one of scale because the Bank is printing much more. The Bank is bereft of ideas because they are all textbook economists who do not understand the real lives of ordinary people.’
Lord Oakeshott, former Liberal Democrat Treasury spokesman, said: ‘QE strikes me as an ever-expanding airbag – it protects us from the worst effects of our economic car crash but won’t put petrol in the tank.
‘The only way to get the economy motoring is using our long-term low interest rates for a capital housebuilding programme. That’s how we built our way out of recession in the 1930s.’
Mr Dale’s comments came days after the Bank revealed that those who had gained most from Quantitative Easing are investors enjoying windfall gains on their portfolios. Banks and the Government have also been major beneficiaries because of their enormous borrowings.
The BoE was ordered by the Treasury Select Committee earlier this year to assess the impact on savers and pensioners, and consider compensation to those who have lost out.
Mr Dale claimed retirees are no worse off because the fall in annuity rates has been cancelled out by an increase in the value of pension fund assets, so their actual income is the same.
But Dr Ros Altmann, director general of Saga, said the argument is ‘simply not correct’ because most pension fund investments have not done well enough to compensate for the fall in annuities.
‘The Bank assumes the only policy to stimulate our economy in recent years has been through newly created money,’ she said. ‘This is patently not true.’
Critics of the QE programme point out that while it was introduced in order to fight the threat of deflation or falling prices, inflation has actually remained well above the Bank’s 2 per cent target.