Why Save? And Yet .
By HONOR CROOME.
WHEN Lord Bruce last week warned a National Savings rally at the Guildhall that Government policy was placing the movement in a position where it could not command continued support, he let a large and ugly cat out of a bag where economists, at all events, had long been aware of its presence. " No conscientious person can get up and appeal to his fellow citizens to subscribe their money to savings, if he knows perfectly well that when the hour of need comes for people to draw them out the pounds they get out will not buy anything like as much as they 'would when the money was put in." So Lord Bruce.
"No conscientious person ? " One wonders. Th. National Savings Movement went into high gear at the beginning of the war, and savers bought certificates with pound notes three of which would buy a good ready-made suit, while twenty of them would make a down-payment on a four-hundred-pound, brand-new, three- bedroom house with all modern amenities., Anyone who, choosing between such a down-payment in a safe area and the purchase of equivalent savings certificates, was swayed by motives of patriotism to plump for the latter, has since had ample evidence that his patriotism cost him dear. It is hardly disputable that every economist knew perfectly well, in t939, that this was likely to happen. Various schemes—such as Lord Keynes's scheme for deferred pay—were put forward for forestalling and preventing the price inflation which has hitherto inseparably accompanied every major war ; some ingredients In these schemes were adopted, and they were not wholly successful ; but that the value of money would in fact depreciate, and depreciate moreover by a greater amount than would be compensated by the Interest accruing under the National Savings scheme, was virtually certain from the beginning. " If one is to bet on the field," said Lord Keynes, " inflation must alwayi be the favourite," while E. F. M. Durbin deliberately advised a too per cent. rise in the price- level as an instrument of war finance. The surprising fact is, how- ever, that in spite of this knowledge even the least Machiavellian of economists did urge their fellows to save, did meet with a response even from the clear-sighted, did even save themselves. All through the war National Savings played a key part in meeting the Govern- ment's financial necessities. It is only now, after the Daltonian cheap-money period and Sir Stafford Cripps's essays in disinflation, that withdrawals have begun to sag consistently below purchases, that savings have in fact become negative.
Partly, of course, it is the limited but _real success of disinflation in reducing the amount of unspent mopey burning hoks in several million pockets which is responsible. II too much money is chasing
too few goods and is prevented, by controls of one sort or another, from running up the prices of those among them which its owners really want, it is not so very much of a wrench to divert it from the pursuit of those inessentials which offer the only available outlet, and respond to the call for National Saving. It is a very different matter when this surplus, this margin between available income and available, genuinely desirable, goods to spend it on, has been pared away, and abstention from spending involves a sacrifice of something which one really wants and could actually buy. By the same token, every increase in the production of consumer goods narrows this margin from the other side. The housewife now can use any money which she is able to spare from daily expenses to restock kitchen, linen-cupboard and wardrobe ; if one cannot get a new car without a three-year wait one can, at all events, buy a television set straight off the stand ; concessions now apparently doomed, but fully utilised while they lasted, made it possible to turn one's unspent margin into bricks and mortar, plumbing and paint, on a scale forbidden since 1939. Saving, in fact, has become at once less possible—with the fall in incomes relatives to the habitua' subsistence of all classes—and more testing to the strength of mind of the saver ; while at the same time the unpleasant facts concerning the loss of purchasing-power of each pound saved has been increasingly borne in on its owners and their enthusiasm for the accumulation of a nest egg correspondingly diminished.
All this may be said of saving in general, whether within the National Savings scheme or outside it ; of all saving, that is, which takes the form of purchase of fixed-interest securities, or of outright cash hoarding, rather than of investment in equities and real property. These latter, of course, can be used as a " hedge " against inflation, though the limitation of dividends• has reduced the attractiveness of industrial and commercial ordinary shares, the threat of nationalisa- tion has a deterrent effect wherever it exists, and the most reliable funk-hole of all—land-purchase—is much less alluring since the advent of development charges. But technical factors, changes in the structure of interest rates, are having a particular effect.
When Daltons stood at par, in the palmy days of 2f per cent. long-term financing, the effective return on the tax-free National Savings Certificates and bonds was the highest available to the investor in the gilt-edged class. The margin was, at one time, regarded as unnecessarily wide, and the cheap-money policy included a reduced yield on the latest series of certificates. Since then the picture has radically altered. " Daltons " have led the way, jerkily but massively, down the declining path which all undated and long- dated Government securities have followed ; the 3 per cent. line, that prepared position .to which the Treasury first fell back with instructions to hold at all costs, was breached in due course, the 31 per cent. Maginot fared no better, and now the 4 per cent. War Bonds stand at only a fraction over par. Were National Savings Certificates a legally transferable trading counter they would certainly have joined in the general retreat, their yield to the new purchaser increasing as their capital value diminished. As they are not, then decreased relative attractiveness appears merely in a decreased willingness of savers to acquire them. It is true, of course, that most purchasers of National Savings Certificates are unaware of the move- ments of security values ; but one cannot entirely insulate any class of investor—or investment—from concurrent events in other fields.
The position of the National Savings Movement vis-à-vis the individual small saver is, taking it all in all, rather paradoxical. Lc' its appeal be successful, let the public response be genuinely adequate, and inflation will be checked, money will preserve its value, and each purchaser will find, when on a rainy day Or a holiday he cashes his holding, that his original expectations have been fulfilled. The case for saving-remains—as Lord Mackintosh pointed out in his rejoinder to Lord Bruce—overwhelmingly strong. But let the response be inadequate, and inflation consequently unabated, and the chief sufferers in the stricken community will be precisely those who have responded with the most public-spirited fervour.. The spokesmen of the Movement might be compared to a theatre manager, surrounded by sparks and smoke, imploring .the audience not to rush in a panic for the exits. No panic, no casualues ; but if the appeal fails, the panic does occur and the exits are
jammed, it is that part of the audience which has obediently stayed in its seats which will most assuredly be roasted. The national interest, which includes the individual saver's, is obvious ; taken by itself, the individual saver's is very far from clear.
One thing is certain, and no plea that the National Savings Move- ment be kept clear of politieal recrimination can make it less so. To attempt to reduce inflationary pressure and- the consequent threat to existing savings by more saving, and more, and more, accomplished sometimes at considerable present sacrifice out of millions of small and medium incomes, is waste of time if that pressure is to be constantly maintained and increased by irresponsible Government spending. A single Supplementary Estimate can cancel the effect of a dozen National Savings Weeks. Behind the theatre manager with his megaphones, his wisdom and his reassurance, it is the Government which feeds the flames—or, at the very best, plies a wholly inadequate extinguisher.
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