RUTH SUNDERLAND: Rishi Sunak needs to value savers

Coronavirus has turned thousands of us – the fortunate ones – into accidental savers, as my colleagues on Money Mail have eloquently explained. 

Those of us lucky enough to still be in work, on full pay or close to it, have seen their spending reduce dramatically. 

A sizeable proportion of us feel better off and nearly 40 per cent of Britons are saving more, which just underlines the strange nature of the economic crisis we are enduring. 

All those foregone lattes and restaurant meals add up to serious money. The Bank of England’s figures show we saved more than £16billion in the April lockdown – more than three times as much as in a normal month. 

The pandemic has certainly made me, and no doubt millions of others, think harder about our consumption. Of course we will resume some spending, but the enforced savings boom is a chance for individuals to make a better fist of their finances. 

It is also a much wider opportunity for Chancellor Rishi Sunak to re-invigorate the culture of thrift we once had in this country and harness a potential multi-billion-pound pool of cash to help revive the economy. He could mobilise the accidental savings army to fight Covid if he chooses, though if not, many will revert to their spendthrift ways. 

For some time I have been advocating national reconstruction bonds – government-backed savings products to raise money for infrastructure. This would encourage savings and channel money into productive investment for the nation.

Following the ravages of coronavirus, Sunak could launch these as Rebuild Britain Bonds in his mini Budget next month. They should pay a decent rate of interest to small savers and be marketed through National Savings & Investments (NS&I). 

The money people would then, in effect, lend the Government could be used to help combat coronavirus and be channelled into green projects and infrastructure improvements to boost growth.   

There is a recent precedent for a new NS&I launch. In 2015, George Osborne came up with Pensioner Bonds, which paid 2.8 per cent over one year and 4 per cent on a three-year product. Bonds worth £1billion were sold in the first two days. However, with base rates at 0.1 per cent, paying a good return on NS&I products means taxpayers would subsidise savers and the private sector would be at a disadvantage. 

To mitigate this, the bonds could be tied to specific projects such as flood defences, cycle lanes, 5G, home insulation or local renovations to bridges or railway stations. If the money raised is put to productive use and generates returns, it will be a net gain to the economy and taxpayers. It would also show how the Government values savers and will support people who take responsibility for their futures. 

There are other steps Sunak could take. Why not make all savings interest tax free? Most of it has already been taxed through PAYE and hardly needs taxing twice.

And what about extending tax breaks on employee ownership to give staff an incentive to forego some of their salary in return for shares in the business on a temporary basis to help firms through the crisis? 

That would relieve some of the cash pressure on companies and give employees a stake in the recovery – a less deadeningly socialist option than furlough. 

The emergency measures announced so far all revolve around borrowing more and getting deeper in debt. Now the Chancellor needs to harness the power of savings and investments to rebuild a better Britain.