Are you prepared to have your savings put into compulsory “recovery bonds”?

The pandemic has put a huge hole in public finances – while bolstering many of the country's savings. Could one be used to bail out the other? Merryn Somerset Webb ponders the possibilities.

War bonds poster
(Image credit: © Getty Images/Stocktrek Images)

You will be worried about the debt. That makes sense. As Philip Aldrick notes in The Times, since last March governments have spent $14trn on trying to mitigate the effects of their virus prevention policies. Global public debt has risen from 84% to 98% of GDP – with our own up from 80% to over 100%. But as public debt has risen, net personal debt has fallen. The Bank of England says that we now have £150bn of “excess savings” (£4,000 per household). The Bank expects around 95% to remain saved. That’s unlikely (I have Covid-19-related excess savings – I plan to spend a hell of a lot more than 5% of them). But we do know people are thinking of their financial futures more than usual – for example, the number of new accounts opened on investment platforms has soared.

So here’s a clever idea. Why not match the horrible public debt to the lovely private savings? Libby Purves thinks this would be brilliant. We should, she says in The Times, issue something similar to the War Bonds that financed some of World War I. They’d be issued by NS&I for a fixed term and pay a fabulous rate of interest (relatively speaking) – “1% or more”. And they’d be called something heart-tugging such as Recovery Bonds. Sounds good, doesn’t it?

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.