§ Mr. Ridleyasked the Chancellor of the Exchequer, further to his answer in theOfficial Report, 18th January 1978, columns 238 and 239, whether he will illustrate the evidence from the Family Expenditure Survey showing the positive correlation between income level and the savings ratio; if he will set out figures showing the static path followed by the savings ratio over the last 100 years; and what was the evidence for the statement, with respect to the last 20 years, that the trend in the savings ratio does not reveal a close connection between savings and the level of personal income.
§ Mr. Denzil DaviesTable 1 of the 1976 report on the Family Expenditure Survey shows that expenditure decreases as a percentage of income as income increases. Similarly, FES data from the 1971 and 1973 reports used in linear regressions of household income on expenditure, making allowance for differences in family size, are also consistent with the view that there is a positive correlation between income level and the savings ratio at a given point in time.
354WThe following table gives savings ratios back to 1900. Reliable data on personal disposable income is not available prior to 1946. The figures shown are, therefore, defined in terms of national income; after 1946, the usual savings ratios as defined by reference to personal disposable income are also given.
Percentage Savings Ratios:— Based on National Income Bused on Personal Disposable Income 1900–4 3 — 1905–9 5 — 1910–14 8 — 1915–19 21 — 1920–24 4 — 1925–29 2 — 1930–34 -2 — 1935–39 6 — 1940–45 32 — 1946–49 10 1 1950–54 15 2 1955–59 18 4 1960–64 19 8 1965–69 20 8 1970–76 22 13 SourcesB. R. Mitchell: Abstract of British Historical Statistics pp. 370 et seq.; Economic Trends Annual Supplement 1977 p.16; National Income Blue Book table 1.
These figures may be interpreted as showing no sustained trend in the savings ratio comparable to the large and persisting rise in real incomes.
The determinants of the savings ratio have been the subject of intensive investigation by economists. Standard works include Dr. M. Friedman's "A Theory of the Consumption Function" (1957) updated by Professor T. Mayer's "Permanent Income, Wealth and Consumption" (1972). Using a wide range of data, neither found any evidence for the savings ratio depending upon income level. With specific reference to the United Kingdom in the last 20 years, official and outside research on time-series data has similarly failed to establish any such dependence.