FINANCE AND INVESTMENT
By NICHOLAS
DAVENPORT THERE will probably be a good deal of table talk this Christmas about wages and inflation and I only hope that the most censorious will not be the most overfed. I am not prepared to admit that we finished the year by opening up an inflationary gap, in other words, that our money resources were in excess of the available- supply of goods. I believe that we were saved by the increase in production and the further improvement in the terms of trade. But as this question cannot be fully argued in a short space I will content myself with one aspect of it— personal savings. Whether or no total savings are sufficient to finance total invest- ment it is safe to say that personal savings are inadequate and must be encouraged and enlarged. No estimate of saving by private households is actually made by the Government. One compiled recently by the Oxford Institute of Statistics for 1951-52 gave a figure of only £90 millions, but this could be increased, on the broader basis of the Government figures, to £330 millions. It seems reasonable to guess that we are not saving much more than 2 per cent. of our total personal income before tax, which was officially estimated at £12,628 millions in 1952. The current figure for personal savings in the United States is about 6 per cent. of disposable income.
How Can Saving be Fostered ?
Is it possible to find new incentives for, or new avenues of, personal saving ? The traditional outlets of life insurance, savings for births, marriages and deaths C ' industrial life "), saving for house purchases, deposits in building societies, Co-operative societies and savings banks, not to mention " national savings " (P.O. Savings, Defence Bonds and Saving Certificates) have all been exploited to the utmost, except perhaps group pension schemes for offices, which are still increasing. As the rich are now drawing on their capital, as the professional classes and the black-coat workers of the old middle class are finding it hard to maintain their accustomed standard of living, it is clear that new savings can be won only from the workers of the industrial class who are now getting a much larger slice of the national cake. How can we attract their money for investment ? The Government can, of course, make them save compulsorily by taxation. It does so already when it budgets for a surplus. (Do not fotget that it collects £380 millions by taxing drink and £590 millions by taxing smokes.) But this is an authoritarian, un- democratic way of creating savings. I suggest that the most popular way would be to exempt from taxation, say, the first £100 of income from Post Office Savings and De- fence Bonds or to issue tax free bonds with a maximum individual holding of £2,500. This device is well known abroad and our own Government accepts the principle by making Saving Certificates tax free and by giving a rebate of tax on life assurance premiums, which incidentally might well be extended.
Lottery Loans But another way which might be still more popular with a public addicted to football " pools " has been suggested by my friend Lord Piercy, chairman of the industrial Commercial and Finance Corporation. This is the lottery loan run by th,. State or a
public corporation. The lottery, he argues, was a respectable device much used in con- nection with public loans from 1694 to 1832. When the puritan middle class came into power in 1832 the lottery became illegal. Now that power has shifted to the industrial workers, who are neither puritans nor middle class moralists, the lottery loan might well be revived. It could be arranged, according to Lord Piercy, so that the losers., instead of losing their money as in betting, would receive a low-yielding security while the winners would get a prize not quite as glittering as a " pool " treble. Could public opinion really be shocked if this diverted workers' money from betting or the pools or drink and tobacco ?
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