HL Deb 24 February 1959 vol 214 cc474-9

4.36 p.m.

LORD HAWKE rose to ask Her Majesty's Government what factors have led to the very marked increase in small savings, and whether they consider the improvement to be temporary or permanent. The noble Lord said: My Lords, at the end of the last financial year—last March—the National Savings Movement had produced, over the preceding ten years, a very small surplus. On March 31, 1948, the total sum invested was £6,069 million, whereas at the corresponding date last March the total was £6,273 million, an increase of £204 million—and this at a time when the annual amounts of accrued interest have been running up to £130 million a year; so it is quite clear that in new money the National Savings Movement over that ten years was very much in deficit.

To-day the position of a Government is very different from what it was before the war. The incubus of the nationalised industries and responsibility to a larger extent for local authority finance has meant that inability to borrow on the requisite scale is a most embarrassing matter for the Government and the Chancellor of the Exchequer. One can almost liken it to the late Mr. Ernest Bevin's coal. He said that given so many million tons of coal he could transform the face of Europe. I believe that Chancellors of the Exchequer over these last ten years would equally have been able to say, "Given so many hundreds of millions of pounds sterling of savings, I can transform the British economy".

The tide seems to have turned last year, and in the first forty-six weeks of this financial year the sum invested has gone up by no less than £270 million of which £223 million is entirely new money. I am glad to see that Premium Bonds, in which I have always had great faith, have played at least their share. Surpluses each week are running at anything from £5 million to £15 million, so it looks as though in this financial year £300 million at least will be achieved; and if we go on at this rate through next year it may well be that we shall achieve something in the order of magnitude of £400 million.

To a Government treading the narrow path between the precipices of inflation and deflation the resurgence of these small savings is probably one of the most important economic factors of the day, and it could have the most interesting repercussions on budgeting now and in the future. For that reason it is vitally important that we should know more about this resurgence—where it is coming from and what has caused it—so that the Chancellor of the Exchequer and the other authorities may get an idea whether or not this is going to become a permanent feature of our economy. One must remember that this movement is against the trend, because trustees, whether they be of the Church or the trade unions or private individuals, are still tending to be equity-minded as against gilt-edged minded; and the new unit trusts have been selling units very successfully at a time when this National Savings Movement has been resurging. So the whole position is really rather mysterious, and most welcome.

I have no right of reply to an Unstarred Question, so I will say now that I hope the reply will show that the Government are taking this matter very seriously. If a commercial firm were dependent for their livelihood and existence on a market of this size they would spare no expense to go in for the best market research to discover how permanent that market was. The ability to forecast National Savings is so important in a world where a Chancellor of the Exchequer tries to balance Budgets overall—above the line and below the line—with savings, in the avoidance of inflation and deflation, that I hope the Chancellor of the Exchequer is doing his utmost to get the best possible intelligence; and I eagerly wait to hear some results which may fall from the lips of my noble friend.

4.43 p.m.

THE EARL OF DUNDEE

My Lords, my noble friend has made some observations, with which I think your Lordships will generally agree, about the great importance of savings to our national economy, particularly in relation to the great problem of inflation and, of course, that of unemployment. But his Question on the Paper, his requests for information and the figure which he quoted just now on the increase which had taken place in National Savings, related to only a section of the whole field; that is, the small savings, which are comprised under National Savings Certificaes, Defence Bonds, Premium Bonds, Post Office Savings, and so on. I do not think there has been a corresponding increase, comparable to the figure which he gave for small savings, in the volume of National Savings as a whole, which of course is the important thing if we are considering this matter in relation to our whole national economy.

But what my noble friend has asked in his Question—and it is, I think, a very important point—is what factors have led to this marked increase in small savings and whether the Government consider that the improvement will be permanent or not. The increase in the level of personal savings was very marked last year. As my noble friend said, the total invested in all forms of National Savings has increased by some £260 millions. While it is impossible to judge exactly which factors have led to this good result, I think that probably the measures announced in the last Budget by the Chancellor of the Exchequer have had a good deal to do with it; that is to say, first, the raising of the limit of holdings of National Savings Certificates to 1,000 units. That has enabled—in fact, encouraged—people who had already reached the legal limit to put more money into them. Then there was the issue of the new Defence Bonds with a limit of £2,000. These two new factors—first the raising of the limit of holdings of National Savings Certificates and the issue of this new class of Defence Bonds—have, I think, encouraged a great deal of this kind of investment during the last twelve months.

The total increase allows for a decrease in the amount of Post Office savings. But, of course, a certain amount of this new saving has come from ordinary commercial bank deposits. Last year particularly, owing to the high bank rate, interest on deposits was at such an abnormally high level that people had more incentive to leave their money on deposit in commercial banks instead of putting it into these various National Savings schemes. That is the third factor. The first was an increase in the holding limit for National Savings; the second was the issue of the new Defence Bonds; and the third that during last year the steady reduction in bank rate has meant that the interest on deposits has come down and therefore people have had more inducement to put their money into National Savings, Defence Bonds, Premium Bonds, or anything which gives them a higher yield. One could, of course, mention a hundred other reasons which have contributed to this improvement and they would all be true. One cannot measure exactly the motives in a man's mind which caused him to save more in one year than he did in another, Some people may have been induced to save a little more because they thought that the value of the pound was less likely to go down. I do not know, but I think the main reasons are those which I have given.

LORD HAWKE

My Lords, before my noble friend leaves that point, as I have no sight of reply may I ask him if he has any information whether weekly wage-earners are beginning to save more, either per head or in greater numbers?

THE EARL OF DUNDEE

I think they are, my Lords, but I have not any statistics which have a bearing on that point. It would be extremely difficult to get statistics which would separate the savings of the small weekly wage-earner from the savings of other people. I think the only comprehensive figures which will be of any use to us in discussing these questions will be those which will no doubt be published, as usual, in the Economic Survey, which doubtless will deal, as it usually does, with the amount of national savings.

My noble friend was optimistic about the future trends of the small savings of which he was speaking, and seemed to hope that this increase of £260 million last year would be exceeded next year and again the year after. I hope that he may be right, but I think it would be unwise to count on the continuance during the next financial year of such an exceptionally favourable result as we had last year. There are indications that the results will again be satisfactory, but I do not think it is reasonable to expect that they will be progressively more and more satisfactory, because the special factors which operated last year cannot be considered as likely to keep recurring, I do not know what is going to be done about National Savings Certificates and Defence Bonds, but there is no reason to expect that new issues and further raisings of the limit will continue. When a new issue of Savings Certificates or Defence Bonds comes out, there is always a rush to invest in it, but that rush is apt to slow down after a few months, and we cannot expect the momentum to continue indefinitely.

Then, with regard to the rate of interest, I am not at liberty to tell your Lordships whether—and, if so, when—the bank rate is going to be reduced again: and even if I were it would not help much, because I do not know. That is obviously one factor which governs the rate of these small savings; and when we consider that during the last year there has been an exceptional reduction from an exceptionally high level of the bank rate down to a level which is still high but not so exceptionally high, I do not know that we can look for the progressive continuance of that factor year after year in future. But, my Lords, although it would be unwise to count confidently on the continuance of this progressively favourable result, we think that the prospects for next year are likely to be satisfactory; and we are certainly grateful to my noble friend for raising this question and for the useful remarks that he has made about the great importance of saving to our national economy.

4.52 p.m.

LORD PETHICK-LAWRENCE

My Lords, I am sure your Lordships have listened with great interest both to the speech of the noble Lord, Lord Hawke, and also to the reply given by the noble Earl, Lord Dundee. I am afraid that neither of them has given us a great deal of enlightenment. I am not in the least blaming them, because I imagine that it is difficult to draw any very exact conclusions from the figures. However, what people would like to know, as Lord Hawke said, is whether the trend is likely to continue; and that, I quite agree with the noble Earl, is exceedingly difficult to prophesy. It is like the weather; it may be due to certain causes, it may be due to others. It may be due to things which we cannot foresee, and I should be sorry to have to try to forecast what is going to happen in the future.

The other thing which everybody would like to know is how far these small savings, as they are called, are the savings of small people—and that, I think, is still more uncertain. There are certain savings, such as those in the Trustee Savings Banks, which are, I imagine, mainly the savings of small people, because the larger people will not be bothered to have their money in that particular form. But when we come to Savings Certificates, they, of course, appeal particularly to very wealthy people who do not need to use their income and who have the desire to escape income tax and surtax—because, in effect, they are a very good means of locking up a certain amount of money which does not deteriorate and on which there is paid no income tax or surtax. Therefore, when we come to Savings Certificates, and I think some other types of so-called small savings, it is not the poorer people but the wealthier people who greedily pick up any new issue that comes along. I am not using the word "greedily" in any derogatory sense, but they willingly welcome the new issues.

On the other hand, I think there is evidence, particularly when we take the Trustee Savings Banks into account, that saving to-day is largely being taken up by the smaller folk, and that whereas in days gone by the Chancellor of the Exchequer reduced the income tax in the hope that that would result in large savings by the wealthy, it is now found that some of the most important sources of savings come from the manual workers' efforts; and that is of very great importance.

There is another source of dubiety, as was pointed out by, I think, the noble Lord, Lord Hawke. A great number of people are now investing in equities, and, that being so, the amount of small savings that goes into these particular Government securities is only a very partial guide to what is happening. The really important question between the small and the big saver is how far their savings are really adequate to meet the investment, public and private, which is going on; and it would be a great help if the Government were to find themselves able to issue a White Paper. It may be that the Economic Survey is the answer, but I do not know how far that gives us all the facts required; I imagine that it can hardly do so. Perhaps the noble Earl will represent to the Chancellor of the Exchequer that any information which could be made available, showing from what sources it is conjectured or believed that these savings arose, and marking them out in the different forms which the investments take, would be of great interest to people who are concerned with the welfare of the economic system of the country.