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So who's been saving money over lockdown?

Posted on | Comments (6)

Just before Christmas, the UK Chancellor was widely ridiculed for saying that people who'd built up savings during the pandemic should help the economy by going on a spending spree when it ends. This week, the govenor of the Bank of England joined in Looking at the numbers, I can see where they're coming from.

heap of small change

Don't get me wrong, I share the outrage that filled my newsfeed in response to this story. How out of touch do you have to be not to realise that most people have been really struggling? Rent payments didn't go down during lockdown, and neither did utility bills. Even those on the furlough scheme saw a pay cut of 20% while many of the self employed, myself included, didn't qualify for any government support at all. So what was the chancellor thinking, talking about savings building up?

In fact, the quarterly report of the state of the nation's finances does show a big increase in savings. It's really striking; there's never been anything like it before.

Households savings ratio

Source: Office for National Statistics

Clearly, a lot of money has been going into savings accounts. One could be forgiven for thinking that everyone's sitting at home, squirrelling away all that spare income that they can't spend on going out. One, perhaps, but not the Chancellor of the Exchequor, who really should know better than to treat a single figure as representing all of the people.

This brings me back to the question I asked in the title: Who has been saving? A briefing paper filed in the House of Commons library on 13th January gives a bit more detail.

Savings by income level

Source: Coronavirus: impact on household debt and savings

This divides the population into five equal-sized groups based on their incomes. It's clear that the poorest 20% of the population haven't been saving at all, they've been using up any savings they had. It's the second-richest group who've been stashing money away. The briefing paper is coy about what the actual incomes are for those five groups, but it's possible to look this up; the poorest 20% are those earning up £16,900 a year, and the second-richest group earn between £31,000 and £42,400 a year. It's interesting that the richest group haven't increased their savings - presumably they've found other things to spend their money on.

Two general points emerge from this story. One is the danger - for ministers as much as for Joe Bloggs on facebook - of responding to the headline without checking the details. The other is the way coronavirus has highlighted and reinforced the inequalities in our society. I will leave you with this succinct expression of the situation, by the writer Damian Barr.

We're not all in the same boat, we're all in the same storm

Storm illustration by Barbara Kelley

Comments (6)

  1. Paul Campbell:
    Feb 11, 2021 at 06:12 AM

    Very interesting, I hadn't thought about this before now but yes I can see this happening. Personally, my income and outgoings have pretty much stayed the same all the way through so I haven't needed to save any more than usual, however, I know my neighbour who retired last year has been saving more just in case the lockdown goes on longer than we all think so he has some money put away. Yes, it is pretty true that we are all in the same water, some of us just have lifeboats, while others have anchors around their necks.


  2. rseabrook:
    Feb 11, 2021 at 07:54 PM

    I haven't personally been affected by the pandemic, either, though other things have changed over the year. I think if I had spare cash, I'd be putting some aside, too.


  3. Joanne West:
    Feb 12, 2021 at 10:29 AM

    I was excluded from real government support. I lost my 2.5k wages a month and was given 500 to last me for 7 months. 7 months of hell, I'm still not back earning that but in uni now. I know people who've taken their lives due to bring excluded for the full year, it's heartbreaking. Rishi is do out of touch.


    1. rseabrook:
      Feb 12, 2021 at 07:12 PM

      It's just horrendous. My heart goes out to you.


  4. Amanda Foxon-Hill:
    Feb 13, 2021 at 10:28 PM

    You are right, it's so important for people to understand this. The analogy at the end is perfect.


    1. rseabrook:
      Feb 25, 2021 at 09:43 PM

      Thanks, it is, isn't it?


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