Britain a nation of savers? Pull the other one

There was talk a few months ago of the UK becoming a society of savers. No longer, said hopeful pundits, would the British be constantly spending on things they can’t afford. Instead, they would ‘deleverage’ and start putting money away for the inevitable rainy days.

For a short while it looked like this might actually happen. The savings rate nipped up to around 8%. All the talk in the Sunday supplements was of the various different methods one might use to reduce their debt. But these days the omens don’t look quite so good.

The savings rate is back down to under 5%, and you only have to listen to the complaints of those arriving at the UK’s airports today to instantly see that spending remains significantly more popular than saving: a huge number of them report that the biggest stress of their volcano-related adventures is that if they are not reimbursed by various insurers and airlines, they won’t know how to pay the bills for their extra accommodation and meals.

Sure, hire car agencies and hotels are expensive. And sure, lots of them bumped up their charges massively as the crisis unfolded. But still you would think that most people would have something put aside for emergencies of one kind or another. The media coverage of the stranded tourists suggests otherwise: they thought about saving for a rainy day and decided to go to Tenerife instead.

We’ve just had the worst labour market numbers for 16 years: the unemployment rate has now hit 8%, its highest since 1994. The number of people who have been out of work for 12 months or more is up by nearly 90,000, and over a million people are having to take part-time work when they want to work full time.

Worse, everyone knows this is just the beginning. Last weekend, the Sunday Times reported that the government was already “quietly” cutting 225,000 jobs across the public sector. And the next government, if it wants to have any chance of cutting the rate at which we are building up our national debt, will surely cut many more hundreds of thousands. If I was already in debt or I had no savings at all, I would think this a very bad time indeed to be taking a holiday abroad. I’d be saving instead.