Sir, - The logic of the Government's new savings scheme totally eludes me. As I understand finance, if I save money on which interest is paid, the institution with which I lodge the money will not hold it unused but will lend it out again in order to earn interest to pay me my interest. Could someone then explain to me how this scheme, as it is meant to do, is going to take money out of the system and hence reduce spending? It seems to me that all it will do is transfer spending from one individual to another.
In addition, the Government will give (pound)1 for every £4 saved. So, not only will the scheme not reduce spending, but all savings will be increased by 25 per cent before the money goes back into circulation. This is in fact an additional tax cut by another name.
If the Minister wants to continue with this scheme, could I suggest to him that all money saved under the scheme be used to reduces that part of the national debt which is funded from outside the country? This would at least have the benefit of keeping interest payments within the country rather than outside. - Yours, etc.,
Brendan Murphy, Sandycove, Co Dublin.