Chancellor George Osborne confirmed in his Budget statement today that the Government is in talks with the Bank of England to extend the scheme which was designed to encourage banks to lend more by giving them access to cheap funds.

As a result, banks are no longer competing with each other for savers’ cash and so cash ISA rates are even worse than they have been in recent years.

Osborne also today announced the target rate on inflation would remain at 2% but revealed an updated remit for the Bank of England’s Monetary Policy Committee that may see the Bank issue “explicit forward guidance” on interest rates.

Mark Henderson, True Potential Investments’ senior partner, said: “Cash ISAs have been outstripped by inflation for some time and there are no signs that this is going to change – they exist only to boost the banks. It is nigh-on impossible to achieve a rate of interest on cash ISAs that won’t cause the value of an investment to diminish.” he added.

“They are an increasingly irrelevant product yet remain popular because people are unaware of the poor rate of return.”

Extending the Funding for Lending scheme would simply prolong and deepen savers’ suffering, according to Anna Bowes, director of Savings Champion.

“Funding for Lending has been disastrous for savers so far and if interest rates continue to fall and inflation to rise, the problem will only get bigger.

“I understand the reasons behind creating a better deal for borrowers but it doesn’t seem to have done all that much to boost the economy.”

According to the Savings Champion Savings Index of Best Buy Easy Access Rates, there are only 10 accounts available to new savers which pay above inflation. This is out of the hundreds available in the market.