Is Britain going backwards in its approach to household finances?

Iona Bain

If we could invent a time machine, what would happen if we transported a middle class Brit from the 1960s to today? There may be shock at the end of free love and the Cold War, but also bemusement that the UK has gone backwards, not forwards, when it comes to financial responsibility.

Household savings are sliding back to levels not seen for 50 years, according to 2014 research from the Centre for Economics and Business Research (CEBR) and the Post Office. Indeed, all progress made in this area in the 1970s may well have been wiped out for good, as Lloyds Bank has found that the amount we’re saving today, as a percentage of our incomes, has halved since the era of strikes and spacehoppers. To be exact, the percentage between 1974 and 1984 was around 9.9 per cent, reaching a peak of 12.3 per cent in 1980. In 2014, that percentage was a mere 4.8 per cent.

What has gone wrong? We can’t say that Britain’s fortunes haven’t improved dramatically over the last half century. The Office for National Statistics says Britain’s GDP has grown by an incredible 9332 per cent. Compared to 60 years ago, we’re working fewer hours for more money. The Chartered Institute of Personnel and Development has found the average working week was 10 hours longer in 1952 than it is today. Meanwhile, weekly wages have ballooned from £9 to £495 a week for men and from £5 to £318 for women, according to Aviva.

The CEBR/Post Office research suggested that the rising cost of living may be partly to blame. Prices certainly shot up on a number of basic goods following the recession, with food, fuel and energy proving more expensive for all of us.

It doesn’t help that inflation has been high and interest rates low. Henderson Global Investors recently revealed that £80bn has been wiped off the value of collective nest eggs over the past five years, with savers earning just £36bn in interest income.

But are there are other, more significant factors at play? Experts point to a toxic cocktail of consumerist aspiration, ease with borrowing and a ‘live-for-today’ attitude. It’s easy to see how prudent saving got lost in that heady mix.

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