Hidden in the small print of the Autumn Statement was the news that the Treasury had increased the forecast money to be raised by NS&I in the current financial year by £2bn. The news prompted some weekend comment that NS&I would be back in the market for savers again and generated some complaints from other deposit-takers.
The reality is rather different. The Treasury increase was little more than recognition of what had already happened. In the first six months of the year NS&I raised a net £2.4bn, even though its original target for the year is £0 (give or take £2bn). As if to prove the point, four days after the Autumn Statement, NS&I announced that it would be cutting the rate on its Direct ISA interest rate from a highly competitive 1.75% to a middling 1.50% at the end of February.
The Autumn Statement said that “Given the increase in gilt yields [Since March 2013], raising finance through NS&I is now comparatively more cost effective than through equivalent gilts.” However, index-linked certificates do not appear to fall into this category. The latest offer for reinvestment of maturing index-linked certificates is RPI + 0.05% for terms of two three and five years, while the four year index-linked gilt is currently offering a yield of RPI – 1.37%. In other words, borrowing via index-linked savings certificates would cost the government nearly 1.5% a year more than via index-linked gilts.