THE BLOG

Encouraging People to Save? Don't.

24/03/2015 11:49 GMT | Updated 24/05/2015 10:59 BST

As I may be about to make abundantly clear, I am no economics expert.

Ordinarily, I would passively accept that I have no right to question economic theory. For years I have believed that Economicsland is an entirely separate nation, and I have simply accepted that the locals knew better than I. However, you don't need to be fluent in Economese to recognise that the people of Economicsland haven't got their own house in order - 'leave it to us and we'll make it work' is far less convincing when they patently haven't.

So, armed with little more than a basic map and a copy of An Idiots Guide to..., I am going to ask An Economics Question:

Why, exactly, do we need to incentivise saving?

I am sure my own life would have been better if I'd had some savings. I'm not saying there aren't benefits to being a saving sort of a person - but they are all personal benefits. A person with savings has more choices, more security and avoids more of the pitfalls of life. So isn't that the incentive? That at the end of it, you have savings? Why is our national government giving an additional pat on the head to people that are making a personal decision to safeguard themselves?

Again, you can correct me if I'm wrong, but I don't know that there is any societal benefit to more people putting more money into savings. Perhaps an argument could be made that, ideally, we would all have a couple of grand put aside for emergencies. Perhaps that would result in a net benefit as fewer government services are required. However, after the first few thousand - let's say the amount you could already put into a tax free ISA - I can't see any societal good to saving.

As far as I can see, 'savings' is just another word to a lot of money being hoarded by an individual. Perhaps an Economicsland native (unless they're still going with the whole 'you are biologically incapable of understanding' argument) could correct me here, but wouldn't getting people to spend money be better for everyone? What good does it do the population as a whole for one guy to have thousands in a safe, when he could be giving that money to a range of businesses?

Yet we are quite happy for the government to encourage such hoarding - we don't consider this an action of the 'nanny state'. We'll protest when the government tries to stop our kids dying of diabetes, but we don't mind them trying to nudge us towards an entirely selfish value system. No one is asking why George Osborne is 'interfering' in our personal saving plans or complaining that the state is trying to alter our personal mind sets.

I suspect that this is more to do with our social values than our economics sense - yes, I am moving the argument back into Actual Land. Because I believe that our failure to incentivise spending splurges on behalf of the rich is not an economic argument.

Allow me to be very, very clear here - I'm not talking about people living beyond their means. I know too well the difficulty that causes. I'm talking about people living up to their means. I'm talking about a society where people pay their bills, put a small amount into a credit union for emergencies, and then spend whatever is left over. You might think this would be a popular policy to champion - but we've never heard it championed before.

In purely economic terms, someone splashing out of high end electronics or making bi-weekly trips to the salon could be a good thing. In societal terms... well, we can't condone that sort of behaviour, now can we? Ultimately, we don't like 'that sort of person'. Never mind that these people could be keeping that electronics store in business, or be the reason a hair stylist has a job. We turn our noses up at anyone being so vulgar, so irresponsible, so, y'know...common.

I suspect the never ending praise and protection for savers is based on our gut feeling, not our financial sense. That is probably why we don't mind the 'nanny state' on this occasion - because it's nannying other people into values we already hold, as opposed to nannying us into doing something for the good of society.

But, as I say, I'm not an expert.