A Labour government would have made a mess of covid too.

trisher

Hair dressers/beauty salons/nail salons, gyms,etc all these things have been restricted or inaccessible during lockdown. I think people who have savings will splurge it all on the things they have missed. If they want to invest money it will be once again in property, which has held its value, by either moving or extending.
As for older people I think much of their savings will go on supporting the members of their family who really need it. It's a mistake to think older people are more altruistic, and think of the wider good, family usually comes first.
It's fine to conjure up something you think would solve the problem but it's a mistake to think it will work without properly researching the market.

Do you really think those who know their own jobs depend on good governance will splurge what they have built up? I really doubt that when we come out of this and see the actual unemployment figures they would all rush to make themselves more vulnerable.

The Bond would actually put a comparitively small level of tax subsidy - those ones the rich already tend to pocket and never spend - to good social use, it will provide a safe place for savers at a time that will, without doubt, be one of worry; an "it's this or put it under the mattress" time. It will pay an attractive interest rate, create jobs, and build the new more equal economy.

What's not to like?

Maizie D it's not my job to do the Opposition's research.

I don't think many people "can do both" The people who have benefitted from Covid, through working at home and having fewer outgoings are mostly people like my DSs who have already substantial investments in property. Improving their property, upsizing, or reducing their mortgage are all better options for them than government bonds. Not to mention the fact that they will be able to spend more once services return and will do so. Savings won't last long as prices rise.

The reason the government introduced the stamp duty suspension was to maintain property prices so the crash you are predicting is unlikely to happen. Property is a finite resource and with little building happening prices are unlikely to fall much
.
And there are probably as many younger people as older ones with savings. People who have worked from home during this epidemic have substantial savings in work related expenses.
There will however be many families where the older person with savings has a younger member in dire financial straits. Who will they give their savings to?

Do you really think those who know their own jobs depend on good governance will splurge what they have built up? I really doubt that when we come out of this and see the actual unemployment figures they would all rush to make themselves more vulnerable
No I think that those who know their local hairdressers etc is likely to close wihout their patronage will choose to keep the people they know in employment by spending their money locally .

trisher

There was a financial expert on the radio saying that the bond idea was not relevant because there is no limit to the amount the government can borrow anyway. It does occur to me that if the government ask people to buy bonds they will not spend their savings in areas that will benefit the local economy-eating out, health/beauty services, home improvements all things which provide employment for people. So perhaps Kier is wrong and the money would be better left for people to spend.

I am not a financial expert (by any means ), but I do wonder if people who theorise about this sort of thing factor in that people need basic security. It comes much lower on the Maslow triangle than spending - meaning that it is more important to people.

For those of us on fixed incomes like pensions, the idea of spending might be attractive, particularly when interest rates give little incentive to save, but when people are at the mercy of inflation, or changes in policy (such as State pension age changes and tax rises), or rises in unavoidable costs such as food, or Council Tax, they often feel that they need to keep a safety net of their own. The increase to SPA alone has really scuppered the retirement plans of millions, and those without savings to fall back on have been hit hardest.

In other age groups, the need to save for a deposit on a house or to pay for childcare and so on can prevent people from spending as they might like - it's not something that only applies to oldies.

Maybe the way to encourage spending is to make the safety net more robust, so that people have the confidence to spend knowing that rugs are not going to pulled from under them, and that they can make financial plans based on trust in 'the system' not to let them down?

I think the chances of the LP doing this are significantly higher than the chances of the Tories, but even so, I would prefer to see promises backed with some sort of guarantee, and until then I will probably sit on my savings (watching them dwindle because of inflation and low interest rates) just in case. I'd rather be recirculating them into the economy, but once bitten, twice shy.

I think this is an o.k. aim for Keir Starmer, but hardly enough to swing anyone's vote, and maybe a bit off putting for people who are in the opposite position and have lost income during lockdown,

Wasn't he also talking about not cutting UB?

I don't think that too much should be put in a speech as it's hard for people to remember. At least he has gone for, among other things, investment in housing, manufacturing, infrastructure. And no pay freeze for key workers.

Importantly, no word of austerity... which I think Sunak is desperate to implement...

I think it has to be fleshed out over time.

I will probably sit on my savings (watching them dwindle because of inflation and low interest rates) just in case. I'd rather be recirculating them into the economy, but once bitten, twice shy.

If you are using a government savings product, such as the proposed bonds, Doodle then you'll be circulating your savings at second remove as the government then spends them into the economy... Government spending boosts the economy, too.

trisher The idea of buying bonds is not to invest in personal services such as eating out and hairdressing, but to invest in real long-term infrastructure and (hopefully) training so that people can work in "green" industries. The UK has expertise in sustainable energy, which it needs to develop, and there is potential in car battery technology and charging points, which it needs to reclaim from other countries which are overtaking us. I'm not a fan of HS2, but the country's road and rail network desperately needs upgrading too.

growstuff I know the idea of the bonds (why do people assume ignorance because you see the holes in something?) I just don't think it is an idea that will be saleable to the general public. Most people will have family/friends who have been furloughed or who have kept small businesses going through a number of measures. If it's a choice between giving the government money and supporting those people I think they'll go for those people. It's a great deal to do with not trusting the government to spend money wisely or to make a real difference.

Almost half of people are better off now than they were a year ago and they have money sitting in bank accounts doing nothing. I think you're being a little naive to think people would go out and spend in local businesses. Somehow or other the government has to get that money circulating in the big economy, not in small micro-businesses. There will probably be about six million unemployed when furlough ends, the high street is dead and some people won't return to working in offices. The government needs to think big, which is going to need big money. The other alternative is to increase taxes to get the money back to the Treasury.

MaizieD

^I will probably sit on my savings (watching them dwindle because of inflation and low interest rates) just in case. I'd rather be recirculating them into the economy, but once bitten, twice shy.^

If you are using a government savings product, such as the proposed bonds, Doodle then you'll be circulating your savings at second remove as the government then spends them into the economy... Government spending boosts the economy, too.

Well, I'll wait and see if the bonds materialise.

My meagre savings aren't going to save the economy, whatever I do with them, but I do think that if any government wants people to spend they have to make them feel safe to do so.

As long as there is a constant threat of tax rises, pension age hikes and so on, people will sit on their nest eggs for as long as they can.

The other alternative is to increase taxes to get the money back to the Treasury.

But the government doesn't need tax revenue before it can spend. That's one of the key economic tenets, surely?

And to increase taxes (which I'm sure is what Sunak will be after doing) just sucks money out of the economy and stifles growth.

people will sit on their nest eggs for as long as they can.

But Doodle. Their nest egg can sit in a tax free, reasonable interest paying bond in an ISA and be contributing to the economy at a remove. Can you not see that?

Where else might it be sitting?

Premium Bonds?

Several people have mentioned unemployed people on here but I wonder whether they know the percentage? The latest figures per the ONS for the period September to November last year (seasonally adjusted) was 5%. The highest that it has been in recent years was 11.7% (seasonally adjusted) between September and November 1983.

The latest employment figures for the same period are 75.2%.

Don't get me wrong - I know that thousands of people have lost their jobs or their businesses and are in danger of losing their homes too, if they haven't already done so. The govt needs to do more to help these people, because it's not their fault that they are out of work.

But there are still millions of people, either in work or retired with pensions who do have surplus funds. Over recent years the interest rates have been so bad that the return on savings in deposit accounts has been miniscule and older people have been complaining about this whilst younger people have benefited, if buying a home. People do want to save, whether it's for their old age, or to pay for their grandchildren's education, or wedding or a deposit on a house.

The days are gone when older people scrimped, scraped and deprived themselves, sometimes of their basic needs, in order to leave something for their children. Which is a good thing because people who have worked all their lives deserve to get some enjoyment, whether it's the hairdresser, taking the family out to lunch and a myriad other things. I also am aware that there are many out there who are existing on the basic state pension but that's another story/thread.

So, I do think that, provided the rate of interest is good, people will invest in bonds, such as those KS is talking about.

MaizieD

^people will sit on their nest eggs for as long as they can.^

But Doodle. Their nest egg can sit in a tax free, reasonable interest paying bond in an ISA and be contributing to the economy at a remove. Can you not see that?

Where else might it be sitting?

Yes, of course I understand - English is my first language .

My point is less about where people's savings are sitting than that if the government want us to spend on things that increase employment by eating out, spending on home improvements etc, then they need to understand that for those on fixed incomes this will mean a reduction in their capital.

As long as governments make sudden changes to things like taxation, access to pensions and other things that affect income, there is likely to be resistance to anything that will reduce the feeling of security that having some savings brings.

If they behave in a more trustworthy manner, so that people can make financial plans that don't depend on having savings to plug the gaps, they might find that people are more prepared to risk spending.

I don’t know where you can find an ISA at the moment that pays decent interest MaizieD? Interest rates are at rock bottom. If the government bond offered a decent rate of interest as well as supporting the economy, I think a lot of people would go for it.

Older Labour voters are often people with decent work pensions (retired teachers, other public servants). I’m one of them and would be happy to invest in a government bond like the one Starmer suggests.

I'd invest in a government bond too - and I'm poorer after the last year.

Weirdly, I'm eligible to apply for the government's Help to Save scheme for people in receipt of Universal Credit, which pays 50% (yes! 50%) interest if I invest for four years. I won't have to find extra money because I'll transfer savings from my current deposit account.

Doodledog

MaizieD

people will sit on their nest eggs for as long as they can.

But Doodle. Their nest egg can sit in a tax free, reasonable interest paying bond in an ISA and be contributing to the economy at a remove. Can you not see that?

Where else might it be sitting?

Yes, of course I understand - English is my first language .

My point is less about where people's savings are sitting than that if the government want us to spend on things that increase employment by eating out, spending on home improvements etc, then they need to understand that for those on fixed incomes this will mean a reduction in their capital.

As long as governments make sudden changes to things like taxation, access to pensions and other things that affect income, there is likely to be resistance to anything that will reduce the feeling of security that having some savings brings.

If they behave in a more trustworthy manner, so that people can make financial plans that don't depend on having savings to plug the gaps, they might find that people are more prepared to risk spending.

I'm sure the government does understand that it means a short term reduction in capital, but the point is that your capital would increase.

The country needs more than hairdressers and coffee shops, which won't thrive unless there are people with well-paid jobs to spend their money. That's why it needs big infrastructure projects, which at the same time benefit society.

In any case, some people have saved more than enough money to go to the hairdresser every day. Commuters round here spend £7k+ on season tickets and many would normally have two expensive holidays a year.

Investing in a government bond is as secure as having savings in a high street bank.

The concept that people will not support local businesses is wrong. It's not just coffee shops, there is evidence that people have chosen to shop locally in lock down and will continue to do so afterwards. The High Street that is "dead" is the High Street of the big chain stores, small local businesses are already being supported www.retailgazette.co.uk/blog/2020/06/3-5-consumers-used-more-local-shops-to-support-them-during-lockdown/

The thing is though that the money that’s already been saved from the disposable spending categories won’t be reinvested in local businesses unless they provide what people have decided they now want to spend their savings on, if they do want to spend rather than save. For example, you won’t go to the hairdressers or the pub twice as often over the next year to spend what you didn’t through lockdown. So, if you’re an electrician, a decorator or whatever you will probably do well, but if you’re say, a nail bar, your income will only be the same.

Casdon

I don’t know where you can find an ISA at the moment that pays decent interest MaizieD? Interest rates are at rock bottom. If the government bond offered a decent rate of interest as well as supporting the economy, I think a lot of people would go for it.

Sorry, I didn't mean that one exists at the moment but if the proposed/theoretical bond had a reasonable interest rate and sat within a tax free ISA it could be quite attractive.

I agree MaizieD it would.

trisher

growstuff I know the idea of the bonds (why do people assume ignorance because you see the holes in something?) I just don't think it is an idea that will be saleable to the general public. Most people will have family/friends who have been furloughed or who have kept small businesses going through a number of measures. If it's a choice between giving the government money and supporting those people I think they'll go for those people. It's a great deal to do with not trusting the government to spend money wisely or to make a real difference.

Well, to be honest, trisher, if people don't want to invest in this, at present entirely theoretical, bond the government could still spend whatever they pleased to invest in these projects. They don't have to borrow anything from anybody; they can just spend the money into existence.

I will bet that Rishi Sunak will announce something similar in the budget.