Andrew Haldenby: A nation of savers would have the values we bank on for the future

AT its root the Greek economic tragedy is about the very simple idea of living beyond your means. You can borrow to fill the gap but at some point the credit runs out.

It's easy to say with hindsight but what Greece should have been doing is saving, not borrowing. And the difference for the UK is only the urgency of the crisis, not its basic nature. We should have been saving more as a country too, both in our private lives and in the workings of our Government.

As Mervyn King, the Governor of the Bank of England, has been warning, the amount that we save has fallen by about a third over the past decade. He wants our economy to be driven by exports and investment – funded by saving – rather than just extra spending by consumers and governments alone.

Hide Ad
Hide Ad

Speaking in Westminster earlier this month Frank Field MP, another far-sighted and independent-minded person in our public life, gave his blessing to a new campaign group which aims to be the first affinity group for all of the 25 million savers in Britain.

Speaking at the launch of Save Our Savers, Frank Field supported its initial plan to get a million people to sign a petition on the 10 Downing Street website to the effect that savers should be listened to.

Frank Field has a strong personal history of supporting savers. In recent years he has led the campaign against means-testing in the benefits system, particularly in regard to pensions. Field's idea is to create a system where we all save so much that we do not need means-tested benefits. He rightly sees that the problem with means-tested benefits for pensioners is that they give the impression of a system that penalises people who do the right thing.

Speaking for the Conservative Party, David Gauke MP also strongly supported the saver but argued that the best way to help them was through the tax system, such as with the use of ISAs. He did warn, though, that it would take time for a Conservative government to cut taxes on saving, so bad is the state of the public finances. Mr Gauke said that the state of the public finances meant that any idea to reduce taxes (including reversing the Lamont and Brown raids on pension funds) could only be an aspiration.

Hide Ad
Hide Ad

Others warned that this would make little difference because tax incentives would just shift us from one kind of saving to another (say, from saving in our houses to an ISA, or a pension).

Regardless of how to encourage it, the need for greater saving can be seen in so many parts of our lives, from the biggest national issues to the most personal.

Saving has become the most important fault line of the economic policy debate. Some are arguing that we must all stop saving and keep spending – and indeed borrow more to do it. They want our governments to borrow even more too.

But the balance of economic opinion rejects this view.

Professor John Taylor of Stanford University has said that the extra borrowing tried in America last year has not kick-started that economy. In fact, the long-term costs of American promises on healthcare and pensions threaten to bankrupt their country.

Hide Ad
Hide Ad

At the personal level, saving helps us provide security for our families against the uncertainties of life. When my small children reach the age of 18, I would expect them to have some kind of college fund, some sort of extra health insurance that sits on top of the NHS and probably a new kind of general savings plan. When I was 18, two decades ago, I barely had a bank account. Saving will only become more important in the future as government scales back (as it should) its own expensive welfare efforts.

Save Our Savers is also rightly concerned about the impact of inflation on savings. In the end, the best way to increase savings is to grow our economy and keep inflation low. High inflation makes people buy now rather than save for the future.

Lastly, Save Our Savers wants politics to become based on the ethics of the saver – forethought, compassion for others, security and a focus on the long term rather than the short. That ties together so much of the present political debate, from the scandal of MPs' expenses to the negligence that has near-bankrupted the country. It is an exciting idea that I expect to strike a chord with many people.

n Join Save Our Savers at www.saveoursavers.co.uk

Andrew Haldenby is director of the independent think tank Reform (www.reform.co.uk)

Related topics: