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Government to increase protection for savers

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In case you didn’t already know this, the first £35,000 of savings you deposit in a bank or building society are guaranteed by the government in the event of that institution collapsing. Judging by the mass panic amongst Northern Rock customers last year, it seems likely that most people aren’t aware of this safety net. But the point is that safety net has been in place for a long time, which, if you ask us, makes it clear that today’s announcement that thegovernment plans to guarantee savings to the tune of £50,000 a bit of a non-story.

For a start, it’s not really committing itself to a much bigger bailout than it had already allowed for, and secondly we already know that the government will always bend over backwards as far as it needs to in order to prevent a major financial institution from going out of business. Too big to fail, and all that nonsense.

The real news here is that the banks won’t be expected to make any sort of contribution to this scheme. OK, you can’t argue with the importance of securing the deposits of innocent savers (unless you believe in some sort of extreme-free-market ideology in which even simple cash savings carry an element of risk, which would make for an interesting discussion) but it does seem like once again the financial industry is being given a free insurance policy at the expense of the tax payer.
Keep partying boys, we’ll pick up the tab…

  1. How does this protection apply to joint account holders?

    Len Harris