Addressing the UK’s low level of household savings remained a challenge through his tenure as Chancellor, George Osborne told a packed audience at the Guildhall in London last night.
Delivering the 2016 Margaret Thatcher Lecture for the Centre for Policy Studies, former Chancellor Osborne said creating products that give the consumer access to their cash was the key to making saving more attractive. Osborne cited his pension freedoms initiative and Lifetime Isa products as examples of efforts to foster a savings culture in the UK – saying his goal with the Lifetime Isa was to create a 401(k)-style product. He made no reference to auto-enrolment.
Osborne also praised the UK’s fintech hub, and argued the challenge post-Brexit was not whether it would move to an EU capital, but rather that its biggest challenge was from the United States. He called for government support for fintech.
Asked how to address the challenge of low levels of household savings, Osborne said: “It is a big challenge. There is no simple lever, though I tried several that the Chancellor has to increase the amount of savings in the economy. Apart from a financial crisis, which is quite good for the savings ratio but which is not a route you ever want to go down.
“What I tried to do as Chancellor was, particularly in a low interest rate environment which is clearly going to be around for a considerable period of time, I was trying all sorts of tax incentives to make more attractive savings vehicles.
“So whether it was the pensions freedoms that gave people access to their pensions to make pension saving more attractive, and then there is this lifetime savings account released in the last Budget, so people could feel they could save for a home and for a pension, these were all attempts by me as Chancellor to create more attractive savings vehicles and we used quite a lot of Government money to subsidise those. And that was the best route that I had to try and increase household savings.
“Interestingly during this period the overall levels of household debt did decline and the borrowing became more secure, partly because of financial regulation, so although there is still a huge amount of work to do, we did make some progress.
“With this lifetime savings account we are trying to create something like the 401(k). Though that legislation has not gone through Parliament yet.”
“Financial technology flourishes in the UK partly because we have got a very strong tech sector, which is one of the recent developments of the British economy but also because we have got a very strong financial sector. The challenge over several years is not ‘is that going to happen here or in some other European capital?’ – it is ‘is it going to happen here or in California?’. That is a classic example of where some sensible government support work with both financial institutions and the tech companies means we can create something really impressive for Europe.”
