Better Deal for Savers.

It is clear a lot of the current problem being felt by the UK is high levels of debt. The problem is how to encourage saving, when interest rates are so low. In a new financial world order I think we should have the situation that the MPC is not allowed to set interest rates to less than inflation + 4%. The position we would like to reach is inflation around 1-2%, this would mean Interest rates around 5-6%. Clearly we cannot go from 0-1.5% the current bank rate to 4.1 ( current inflation) + 4% overnight, but the Government should make a commitment that we will steadily progress towards this situation over the next 10 years. The 10 years starting when the recession reaches its maximum pain. This would give people time to adjust i.e. reduce they indebtedness and increase their savings. Businesses could make their decisions on interest rates being reasonable rather than very low. If we get rising inflation as a result of all the money pumped into the economy and we get to the situation where Interest rates have to be set to at least Inflation + 4% before 10 years have passed then so be it. After that we should stick to
limit no matter what, especially as I think this recession will prove that cutting interest rates does NOT stimulate the UK economy as any increase in borrowers having to spend it offset by.

• Impact of weakening pound on inflation
• Paying off their Mortgage quicker
• Banks not passing on the full savings yet hitting savers
• Need to pay money back with future increased Taxation.
  

After all its only the fact that Banks leverage the amount they lend compared to what they borrow, that makes any gain for borrowers cancel out the loss for savers.
We should also have a better measure of inflation, or at least another measure, we should base this new measure on the cost of Food, Oil, Energy and Council Tax. These are the essentials that people have no real means of avoiding. Also Food, Oil & Energy are all things are limited resources in the World and hence likely to increase. Council Tax is a black hole that needs to be accounted for.