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Savings Ratio

Volume 474: debated on Thursday 24 April 2008

11. What assessment he has made of the long-term consequences for the economy of the savings ratio. (200869)

The savings ratio is affected by the macro-economic conditions, the financial market conditions and consumer attitudes at any one time. The Government are currently forecasting an increase in the household savings ratio, partly in response to current economic conditions.

Why did the Chancellor abandon prudence some nine years ago to increase dramatically the size and cost of Government and public expenditure, while discouraging saving by a combination of inflation and high personal taxation? Now that the housing market has gone virtually from boom to bust, and it is estimated that UK personal indebtedness is rising by £1 million every five minutes, what further action will the Chancellor take to improve the savings ratio, which is so important for stability in the economy?

I have to say that I completely disagree with the hon. Lady’s diagnosis of the economic situation. We have invested, it is true, in schools, hospitals, education, health care and transport infrastructure, and that has had a very big impact on things like standards in school and the number of deaths from heart disease and cancer. We have also seen big improvements in our economic prosperity. We have gone from being at the bottom of the G7 league to being second from the top in prosperity per head of population. That is a very big improvement in our economic wealth and well-being, and it is as a result of the investment and macro-economic decisions that this Government have taken.