Jeff Salway: Not quite a silver bullet, but Lloyds’ cash prizes a valiant attempt to shake up the market

BANK bashing has become so embedded in the national psyche that it’s now almost instinctive to have a crack at them even when they do something right.

I’ve been guilty of that myself, although their incessant offending means that having a go at the banks is akin to shooting fish in a barrel.

There are occasions when a bank may feel that it’s damned if it does and damned if it doesn’t, however. Lloyds Banking Group’s new savings initiative has been dismissed as a gimmick in some quarters. But while it does have the qualities of a product that perhaps garners more headlines than it merits, the simple fact is that in the current environment, any innovation aimed at boosting the options available to savers must be welcomed.

To recap, Halifax and Bank of Scotland – both owned by Lloyds – are offering monthly cash prizes worth £6 million a year in a move that puts it in competition with NS&I’s premium bonds. In all, 13,000 prizes are on offer each year, compared with 21 million premium bond prizes worth more than £630m last year.

To enter the draw for monthly prizes ranging from £100 to £100,000 savers must be aged over 18 and have savings balances of £5,000 or more. Crucially, the bank still pays a nominal amount of interest on those balances – unlike premium bonds – but the main returns will be paid through the prizes.

As an attempt to shake up the market and encourage more people to save, this is pretty canny, although the minimum savings mark should be far lower if the bank really wants to boost savings levels. The success of premium bonds (and the National Lottery) comes from the promise of a big lump sum and the sense of being “in it to win it”. At a time when returns from even the best savings accounts are being eroded by inflation, it makes a lot of sense.

If you were being cynical you could accuse the bank of exploiting an instant gratification culture, where many people want big money without having to do anything for it. Some critics have also asked why the bank doesn’t just use the £6m to make its savings rates more attractive, but that sum would amount to very little when spread across its savings range.

So is it worth doing? The big obstacle is the £5,000 threshold. The draw is open to any cash on deposit, so a lot of Bank of Scotland customers will already be eligible to register for it, or will need only to top up their accounts to do so.

If you’re not already with the bank and you’re looking for a savings account, however, your first move should be to use your annual Isa allowance. Then make sure you compare products. Bank of Scotland does offer some competitive cash savings products, but there are others that pay more. If you’ve used your Isa allowance and have sufficient cash to squirrel away to qualify for the draw, it’s well worth looking at in the current climate.

Lloyds should be congratulated for some much-needed savings innovation. It’s not the solution to anyone’s problems, but it’s a start and hopefully lays down a challenge that other providers will accept.

SUN Tzu he ain’t. From football managers to captains of industry, leaders are fond of quoting from Tzu’s seminal text, The Art of War, but I don’t think it has graced David Cameron’s book shelves.

His response to the eurozone crisis – signing a round-robin letter effectively asking the G20 to sort it out – highlights his glaring lack of leadership.

For all of their many flaws, Gordon Brown and Alistair Darling responded quickly when Northern Rock hit the buffers and when the collapse of Lehmans sparked the banking crisis. Recapitalising the banks was key, and Cameron and George Osborne argued against it. Now, they’re either playing their cards close to their chests or have no clue as to what should be done.

What does the Prime Minister think he’ll achieve by rebuking other leaders who can fairly turn around and tell him to get his own house in order? If we are “staring down the barrel” of a fresh global recession, as Cameron claims, it would be reassuring if he was able to offer some ideas with substance.