NATIONAL SAVINGS (Hansard, 28 January 1969)

§ Sir Gerald Nabarro (Worcestershire, South)

I raise this evening the question of National Savings and the poor performance in recent years. I am keenly conscious of the fact that during this Adjournment debate no reference may be made to the need for amending legislation. I shall not transgress in that regard.

Conservative policy in this sphere has been made very clear in a recent statement entitled, "Make Life Better". I commend the statement to the Financial Secretary. National Savings should be above party controversy. The Conservative Party wrote in its booklet, on page 10, under the heading, "Increase Savings": There is one simple way of cutting taxes. It is to increase savings. The more we save, the less we have to pay in taxes. And the less we have to pay in taxes, the more we can save. In thirteen years of Conservative prosperity, annual personal savings increased by nearly £2,000 million. Tax rates were cut by £2,000 million. The next Conservative Government will give real encouragement to new savings and to new savers. We will give relief for those to want to save regularly over a period of years. We will introduce a voluntary Save-As-You-Earn scheme. That is a statement intending to convey that my party believes in substituting for a measure of P.A.Y.E. a measure of S.A.Y.E.—a very laudable sentiment, having regard to the fact that every Chancellor of the Exchequer, of every party, in recent years has made the valid point, notably in the period before each year's Budget, that he can maintain taxes at their present level, without increasing them, or even reduce taxes, only if he can get greater personal savings.

The same statement continued: The Conservative Government will make a real drive to encourage savings. In addition to tax relief for regular savings and the Save-As-You-Earn scheme, we will encourage more people to invest in Britain. In the last twelve months we have seen a bigger increase in taxation in this country than has ever occurred in a comparable period of twelve months at 1286 any time in our history. In March, 1968, taxes were raised in the Budget, related to a full year, by about £1,150 million. On 22nd November last—as if the March impost was not enough—taxes were raised by a further £250 million by the use of the regulator. The total increase in tax in the current fiscal year is about £1,400 million, related to a full year. I have always claimed that a good deal of that could have been avoided had the Chancellor really encouraged national and other forms of personal saving.

I want at the outset to quote the dismal record of National Savings under this Administration. The Chief Secretary to the Treasury at Question time this afternoon fobbed me off on two occasions when I alluded to this by quoting the aggregate of National Savings still remaining vested, at approximately £8,500 million. That is an entirely invidious figure. The aggregate has risen to that figure much more slowly in the last four years than the aggregate vested was rising in the preceding four years. I cannot do better than put in the OFFICIAL REPORT of this speech the exact figures that have been issued by the National Savings movement. They are, therefore, official figures and cannot be controverted by the Treasury. I quote them this evening first in respect of the last four years.

In 1965 National Savings increased by £73.5 million; in 1966 National Savings declined by £29.5 million; in 1967 National Savings increased by £130.6 million; in 1968 National Savings increased by £70.3 million.

In four years National Savings increased by £244.9 million, or an average increase of £61 million per annum. In the four years preceding the advent of a Labour Government—that is, the last four years of Tory rule—when money values were a good deal more by comparison—the 1961 increase in National Savings was £213.6 million; in 1962 £238.1 million; in 1963 £314.6 million; in 1964 £356.9 million; and the average over the four years was an annual increase of £281 million.

So in the four years ended 31st December, 1968, the Labour Government averaged in National Savings a surplus of £61 million per annum, while in the four years ended 31st December, 1964, 1287 save only the last two months which I exclude, the Tory Government averaged a surplus of £281 million a year. In other words, the Tory Party's record in National Savings is four and a half times as good as Labour's during the 1960s. That is a pretty formidable indictment for this Government to refute, because the level of National Savings is always an indication of the tempo of inflation or otherwise. People do not save in National Savings when they are fearful of continuing and chronic inflation, and this is the reason why the record in National Savings has been so very bad in the last four years compared with the four years which preceded it.

I hope that the Treasury Ministers will not allege that the reason for the low level of National Savings is that personal savings as a whole have also been of a low order. On the contrary, the aggregation of sums saved by unit trusts and similar agencies has been immense, and rising year by year. It is the very unattractiveness of National Savings in present circumstances and the very attractiveness of unit trusts in present circumstances which cause the comparison to be weighted so heavily in favour of forms of personal savings other than National Savings.

I quote the unit trust figures because their rise is one of the most phenomenal circumstances of our financial history during this century.

In 1962 the increase in investments in unit trusts was only about £36 million. In 1963 it was £99 million; 1964, £58 million; 1965, £93 million; 1966, £59 million; 1967, £272 million; 1968, £619 million.

So, whereas National Savings in 1968 succeeded in putting on a sum of only £70 million increase in the aggregate sum vested, unit trusts put on £619 million advance in the aggregate sum vested, or about nine times as much as National Savings. In unit trusts measured as between the end of 1967 at £853 million vested and the end of 1968 at £1,482 million vested, figures supplied to me by the appropriate unit trust agency, there is revealed this phenomenal advance of a £619 million increase in the sum invested in a single year.

All this has caused a good deal of consternation in the National Savings 1288 movement, which I warmly support, as the Financial Secretary knows. If my record were searched in the Treasury, it would be found that over the last 15 years or so I have often applied to the Treasury for a brief on the National Savings statistics in order to make appeals in various parts of the country for an increase in National Savings. In postwar years they have generally been buoyant, and I am the first to applaud the selfless work done by tens of thousands of public-spirited men and women throughout the country who have had a douche of cold water in the last 12 to 18 months from the poor results achieved

Sir Miles Thomas, Chairman of the National Savings movement, gave voice to apprehensions when, as reported in The Times of 9th December, he alluded to a record weekly fall. In fact, the heading on the report was: £14 million drop in National Savings 'biggest ever' The report said: A fall of nearly £14 million in National Savings last week was unprecedented, Sir Miles Thomas, chairman of the National Savings Committee, said last night. A fall could be expected at this time of year "— that is, early December, of course— but he believed this was the largest weekly drop ever. Not only was it a reflex of the Christmas shopping spree which rejected out-of-hand any Government exhortations not to spend, but it spotlighted the flight from money into material things. 'In today's turgid international monetary whirlpool realistic promotion of real savings is a difficult task', said Sir Miles. The article later drew attention to the trend towards alternative forms of personal savings and said: The result has been a growing trend for people to invest in equities, either directly or indirectly through unit trusts; in housing, in antiques and in other forms of investment which provide some protection against inflation, or quick spending in anticipation of imminent price rises. In my words, a hedge against inflation is what everybody is now seeking, to the detriment of the National Savings movement.

The Times Business Supplement alluded to the unit trust sales on the crest of the £329 million wave in 1968—that is the figure of new investment—and said: Looking back over the year, the feature is undoubtedly the breakthrough in winning new 1289 customers for the industry. The big uplift in sales started long before the expansion in the number of unitholders' accounts, partly because the small holders who at one time constituted the majority of customers elected to take their profits in the early months of 1968. But there is no doubt that the climate of financial instability, coupled with the electric pace of share movements, have conspired to persuade many who formerly were content to manage or leave unmanaged their own portfolios, to put them into the hands of professionals, of whom the most accessible are the unit trust managers. How right they are!

I quote from the Unitholder of January, 1969. At the head of the league of top performing unit trusts I see the Oceanic Growth Trust, which showed a rise of 74.9 per cent. in a year; Target Financial showed a rise of 74.2 per cent.; M. & G. Special, 69.1 per cent.; Ebor Capital Accumulator, 57.5 per cent.; City of London, 57.2 per cent.; Scotfunds, 57.2 per cent.; M. & G. Magnum, 56.9 per cent. and so on.

I shall not go on quoting them. In order that the Financial Secretary, who knows a great deal about these matters outside the House as well as inside, should not accuse me of making an invidious or unfair comparison between these unit trusts and National Savings, I say that these figures are subject to Capital Gains Tax and to other forms of taxation which are not applicable to National Savings Certificates or Premium Bonds. Therefore, these figures of percentages gained in a single year must be discounted in respect of taxation, but even with maximum discounting in respect of, for example, top surtax payers, and for all other forms of direct taxation, these trusts to which I have alluded still show a growth after tax of more than 40 per cent. in a single year, whereas the National Savings Certificate has to put up with a few per cent. growth, according to the time the investment has been held.

These unit trust values are growing, especially if they are the "growth-accumulator" type of trust, at many times the rate of National Savings Certificates.

I cannot advocate legislation during an Adjournment debate, but my appeal to the Financial Secretary is that he should make representations to the Chancellor urgently to include in his Spring Budget or earlier, schemes of Saving-As-You-Earn which will be comparable in 1290 attractiveness to the highly advertised and intensively promoted accumulator-growth types of unit trust which are in popular vogue and which now attract not tens of thousands or hundreds of thousands but millions of supporters in the country. If the National Savings movement is to survive it is imperative that it should compete with the private enterprise unit-trust form of saving, which has now become extremely popular, as shown from the figures I have given. Without advocating legislation, I suggest that what we need is a form of contractual savings for National Savings requisites, with attendant tax relief, which will, after tax, match the rate of growth of unit trust investments.

I commend these proposals to the good sense of the Financial Secretary, with his known record of achievement in financial circles before he entered the Administration. He knows very well what I am talking about, and that every figure is correct, and I hope that I shall receive from him an unpolitical and a hopeful reply which will encourage continued support for the National Savings movement.

§ The Financial Secretary to the Treasury (Mr. Harold Lever)

The House is grateful for the fact that the virtue of the hon. Member for Worcestershire, South (Sir G. Nabarro) is not a fugitive or cloistered one, and that from time to time he, as tonight, puts us in his debt by raising, in good voice, and with considerable shrewdness, knowledge and care, a matter of great public importance, and raising it in a manner that invites the non-political reply that he suggested I make.

However, I hope the hon. Member will not mind if, as is inevitable, we have to refer to the ebb and flow of political parties as well as to the ebb and flow of savings.

I am afraid I shall disappoint the hon. Member by not elaborating legislative intentions. He has great ambitions for the National Savings movement, and has been a good friend to it. I see his difficulty in explaining how, without legislation, he could possibly ask me or the Chancellor to shower on the National Savings movement these manifold advantages which he indicates. I will do my best to give a reply which he will find reassuring or encouraging.

1291 It is true that in the period to which the hon. Gentleman referred National Savings Certificates, Defence Bonds and so on did better than they have done in the years of the Labour Government. There is an ebb and flow in these things, and the hon. Gentleman will appreciate that what he has quoted are net figures of advance in the totals. That does not mean, therefore that only £70 million or so was invested this year. Much more was invested, but some is always withdrawn each year. What is really relevant in National Savings is the immense total of about £8,500 million invested in the movement, which performs a very fundamental rôle in our economic affairs.

What is of decisive importance for a society is not which channel of investment is selected—though, of course, the Treasury has a special interest in the National Savings movement—but the aggregate of savings by the population. It is not for the Government, with all their enthusiasm for the National Savings movement, to frown on any other avenues or media of savings. What we are interested in overall is the percentage of national income put by as seed corn in the way of savings.

I do not want to come between the hon. Gentleman and his illusions, but saving ratios in all forms of savings are as high today as they were under the Conservative Government. Indeed, one could justly claim that they were higher, taking the whole period of the Government. I shall quote briefly figures of the ratio of savings to the national income, using three-quarters of the year so as to cope with 1964. It is as follows: 1958, 4.6 per cent.; 1959, 5.3 per cent.; 1960, 7.5 per cent.; 1961, 8.5 per cent.; 1962, 7.4 per cent.; 1963, 7.3 per cent.; 1964, 7.3 per cent.; 1965, under a Labour Government, 8.3 per cent.; 1966, 8.1 per cent.; 1967, 7.6 per cent. Those figures dispose utterly of the romantic and poetic flights of the imagination so often heard and seen on television and in the newspapers about the flight from money, that unwillingness to save, the dash into antique silver and the like.

I have been flying from money most of my life. Everybody who buys anything 1292 flies from money. As long as one takes good care to fly into it as well as from it with appropriate rhythmic balance, all is well. People in this country have not been engaged in a flight from money. They are saving at a higher percentage rate than was normal in previous years. Of course we want to encourage more saving, and of course the avenues of saving they choose to tread vary according to circumstances.

I think that the hon. Gentleman sought to make the point that it is all very well saying that the aggregate of savings and the ratio of savings to national income is as high as ever, or higher, but that people do not trust fixed interest any more. But this is not true. The hon. Gentleman quoted figures showing a decline, or tiny increase, in National Savings fixed interest lending compared with what was the case under the Conservative Government. But has he seen the figures for the building societies in the same period? A vastly bigger increase has taken place in fixed interest lending to the building societies since the present Government have been in office than anything that occurred while the Conservative Party was in office. The rate of increase has been greatly speeded up, and to a degree which quite dwarfs his figures for the decline in National Savings.

There is a reason for this. Under the present Government—and I am not trying to score party political points—house building has proceeded at a record pace, and, naturally, the money must be there to finance it. It is not surprising that the building societies have made attractive proposals to induce the arrival of money for which there is such keen demand from their customers. So there has not been a flight from money, and the so-called record of withdrawals is a trifling statistical matter of £5 million in one medium. National Savings. It represents so tiny a part of the total still remaining as not seriously to warrant the inferences sought to be drawn from that infinitesimal decline in the special week at Christmas.

The movement into equities is not unhealthy, either. Inevitably, there is a tendency in modern society for more and more people to become sophisticated enough to be aware of the risks of equity investment and the possibilities of equity 1293 investment. The hon. Gentleman is too knowledgeable and shrewd to suppose that the National Savings movement can ever offer, except through the Premium Bond, a 74 per cent. increase in one year such as a unit trust can hold out as a possibility. But there are still vast numbers of people who want neither the risks of equity investment nor its rewards. They are catered for by the National Savings movement, the building society movement and similar movements.

What we want to do is to see that all forms and expressions of saving are encouraged. All the romantic talk about antiques, Sotheby's sales and Christie's sales and that sort of thing is nowhere to the point. The figures dealt in there are trifling compared with the stupendous sums invested in fixed-interest, let alone equity, investment in this country today—£8½ billion in National Savings, nearly £8 billion in building societies, to name just two avenues. It is not worth talking about the much sensationalised antique and silver buying, The Times index of old print prices, and so on. These are all very amusing for those who like to decorate their walls and improve their aesthetic responses, but they have no economic significance whatever.

Like the hon. Gentleman, I recognise thrift as a great virtue. It adds to the freedom of an individual. It adds to his dignity. It gives him opportunities for courageous or adventurous action not available to the man who has not the little reserve which thrift gives. It adds to his dignity particularly in the latter part of his life. I have said before, but I risk saying it again, that when a man comes to retire, however gratifying it 1294 is to reflect that he is a one fifty-millionth part-owner of the national railway system, it is not quite the same as having a little money in the bank.

Therefore, like the hon. Gentleman, I have always been an eager partisan of saving. The Chancellor has indicated that he will look closely at all the possibilities for encouraging savings. I have promised this myself in the House, and I renew that promise to the hon. Gentleman. I am grateful to him for the way in which he opened the debate and for the enthusiasm he has for thrift in general and National Savings in particular. I promise him that his words will be carefully noted. We are hard at work considering what can be done in the sort of directions he has in mind.

This is, and will remain, a non-party subject. Both parties recognise the value of savings to the individual, the necessity of savings to the community, and the possibilities of lightening the burden of taxation. But I hope that I can send the hon. Gentleman home to his well deserved rest tonight reassured that we have not become a nation of profligates, that our people are as thrifty as ever, that, notwithstanding the high burden of taxation, so great is their income and so persistent are their virtuous habits that the ratio of saving in all its forms, fixed-interest and equity savings, runs at record levels. We shall certainly, in the spirit in which the hon. Gentleman spoke, do our best to encourage an augmentation of this process.