What happened to sturdy individualism?

One of the results of the recent reduction in the Bank of England base rate, has been to encourage borrowing and discourage saving, - as if we do not have enough of the former!

Many savers, who have denied themselves throughout their working life, in order to put a small amount away regularly towards supplementing their diminishing pensions in old age, now find that they do not have enough, and that with interest rates so low and inflation higher the real value of their savings is actually going down, even if they manage not to withdraw some of their capital.

There is little wonder that our savings to income ratio is now at its lowest for 50 years. There is now little incentive for personal saving and independence, and because there is little saving there are inadequate deposits at banks and building societies. Banks then are driven to borrow from other banks, often involving securitisation from various countries around the world. The result is a credit crunch, with bank failure and an ongoing suspicion of other banks.

Instant gratification is wanted, instead of saving for things, and we increase debt because it is cheap. We need citizens to take a longer term view, to save and accumulate wealth. The problem is that in recession/depression, all short term policies are still being directed towards spending from borrowing!

Cameron and Osborne have seen the problem with savings, and have suggested abolishing income tax on savings. Mr. Darling has made hints that he may do something like this in his budget. The principle is surely right, although much damage has been done, and the removal of tax will add to the size of public debt!