RUTH SUNDERLAND: Britons can splurge without guilt when lockdown lifts


The packed scenes in parks and the latest data on GDP tell us the same thing: there is a huge amount of pent-up demand in the economy.

People are desperate to get their pre-Covid lives back and they will be spending in pubs, restaurants and shops the minute they are allowed.

Many can afford to splash out. The GDP data reveal the scale of cash hoarding, with the savings ratio at 16.1 per cent of incomes in the final quarter of last year, far above normal levels. 

People are desperate to get their pre-Covid lives back and they will be spending in pubs, restaurants and shops the minute they are allowed

Andy Haldane, the Bank of England’s chief economist, believes the recovery will be much stronger than many assume because of that wall of savings, which will have hit £250billion by the summer. The economy is, in his words, like a coiled spring.

Analysts at Capital Economics say that if households merely revert to spending the same proportion of their income as they did pre-pandemic, that would be enough to drive a rapid recovery.

If they spent everything they have saved during Covid – admittedly, this is very unlikely – it could boost GDP by 6.5 per cent. But people will only spend if they feel confident.

If they are fearful for their livelihoods, they will keep their wallets shut. Habits may have changed and some will continue to save or pay down debts. 

Many of us have learned to live without luxuries such as gym memberships and will not renew them.

It matters how and where the money is spent. If too much goes on imported goods or foreign holidays it will limit the benefit to the UK. 

Even so, those of us fortunate enough to have excess savings can for once splurge without guilt.

Fake news

On this day a number of years ago, back when I was a trainee financial journalist on the Daily Express, the late City Editor, Tom McGhie, told me to write a story about a run on the Scottish pound. It took a moment to realise the date. 

The question of an independent currency for Scotland, of course, became deadly serious in the referendum of 2014 and the antics of Nicola Sturgeon and Alex Salmond might well be enough to cause perturbation on the international money markets.

The best April Fools, like Volkswagen of America’s supposed name change to Voltswagen, are just plausible enough.

The Voltswagen ‘story’ was reported as fact by many media outlets. But you can hardly blame people for being credulous when you consider the stories that hit the headlines on other days of the year.

To take just a handful: Elon Musk has stopped calling himself the chief executive of Tesla and now goes by the title of ‘Technoking.’ His company is still valued much higher than Volkswagen, despite selling far fewer cars.

Nigel Farage, the former UKIP leader, really has been hired as an adviser by the Dutch Green Business Group.

It is fact, not fiction, that Bank of England policy makers have been mulling negative interest rates. If they come in, depositors actually could be charged a fee to leave their money in the bank and lenders might pay borrowers to take out loans. It’s already happened in a number of countries.

An Aussie chancer called Lex Greensill genuinely did have ex-PM David Cameron dancing in attendance on him. And Deliveroo, a takeaway food service with a silly name, seriously thought it could command a stock market valuation of nearly £9billion. 

In the weird and wonderful world of finance these days, it can be quite hard to tell when your leg is being pulled.

Different boats

The UK’s billionaires have had a good pandemic – well, not Sir Philip Green, assuming he qualifies from his lair in Monaco – but most of the others. Their combined wealth shot up last year by 36 per cent or a combined £40billion, according to research.

Covid-19, has made existing inequalities worse, largely due to the ultra-low interest rates and QE money-printing that are propping up virus-stricken economies.

Low interest rates tend to push up asset prices. This favours capital over labour, the old over the young, the rich over the poor, borrowers over savers and men – because they are usually better off – over women.

As the former Bank of England governor Mark Carney puts it: ‘We may all be in the same storm, but we’re not in the same boat.’

Some of us are in luxury yachts, others bobbing along in leaky old tubs.

The answer to this, however, is not hiking taxes, but unlocking the country, creating jobs and getting the economy back to strength as soon as possible.

Uncoil that spring.

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