Well this blog says the banks had better start offering a better deal if they want our money on deposit. And to improve on RPI+0.5% tax-free for a 40% tax-payer that means a deposit rate of about 10%, so I don't think we'll be seeing that any day soon.The certificates are a "bad idea", [says Citibank], and are likely to be an "expensive" form of funding for the Government given that they have a higher yield than gilts and the interest is tax-free. Citigroup analysts criticised the Government's expansion of National Savings and Investments (NS&I) and said that it should instead be looking to reduce the size of the scheme and raise funds through the sale of gilts.
"While the new national savings index-linked certificates appear highly popular with many investors, we believe they are a bad idea for the government: they are likely to prove a highly expensive form of funding and will hinder the important task of reducing the UK banking sector's reliance on wholesale funding," said Citigroup.
There are about £1 trillion on deposit in British banks so the £2 billion that NS&I are planning to take is really small fry. But the banks seem to resent every penny they don't get.