On January 8, 2009, Anatole Kaletsky wrote a column entitled Punish
savers and make them spend money. The following letters are a selection
of those that the Times received in response.
Sir, I hope no one pays any attention to Mr Kaletsky's proposal to tax
savings. If they do we are scuppered. We have paid tax on the income saved,
the capital gains and the income from the savings and now they form an
important part of what we have to live on. It's bad enough to lose the
income in whole or in part without being further taxed. Anyway I thought it
was the job of the bank to use the money we have lent them to support
industry and if not what the hell are they doing with it?
Neill Hill, Amberley, W Sussex.
Sir, What, are you crazy? We can see a justification for bank charges where
the bank is working on our behalf, processing payments and managing our
day-to-day balance. Savings deposits are working for the bank. Everyone
would just take their money out and store it in a safe place. The run on the
banks would bring down the Government.
Abigail Watson, Peterborough
Sir, I have always found Anatole Kaletsky's articles edgy and provocative.
However, I fear that now he has lost it. Quite how he can describe the Tory
proposals as "Marxist" when it is he that is proposing to make
savers spend their money I really don’t know. His proposals sound quite
Marxist enough to my ears, thanks very much. Once the state has taken its
(already too large) share of my earnings then it should butt out and leave
me to do what I wish with it, if it’s all the same with you. Spend it, save
it, burn it – it’s none of the State's business.
John Hudson, Nottingham
Sir, I wonder if Anotole Kaletsky would take such a cavalier attitude to
savings rates if he were a pensioner dependent on a state pension
supplemented by the interest from a small savings account. Perhaps he would
even be concerned if he found his income suddenly reduced by between 20 and
30 per cent as the deposit rates drop towards zero. He might even be
scratching his head as to how he could pay the large increases in energy
bills. But not to worry Mr and Mrs Pensioner, just spend your meagre life
savings. When all your capital has gone the state will be there to pick up
what pieces are left.
Warwick Martin, Stoke-on-Trent
Sir, Anatole Kaletsky's opinion piece demonstrates quite clearly why the
British public is highly unlikely to trust economists or others telling them
what to do with their money. There may well be valid theoretical economic
arguments for why spending our way out of the current downturn would be
productive overall and in the long run, but the average person will not be
encouraged to do so by such articles. To suggest that the general public be "forced"
into using its money in certain ways or indeed penalised for not spending by
taxing all risk-free savings is appalling. Given the constant political
emphasis (nearly to the point of propaganda) that we are facing a huge world
recession, jobs will go, house prices will fall, and people will in general
be worse off, it is hardly surprising that most will want to make sure that
they are prepared for the proverbial "rainy day". It may sound
novel or indeed naïve, but most people assume that they should be allowed to
spend their hard-earned money as they wish. They will certainly not feel
inclined to do so if they are bullied into it - I for one am not minded to
go out and blow my overdraft buying up Marks and Spencer simply to prove Mr
Kaletsky's theory correct.
Caroline Klein, Northolt
Sir, At least Anatole Kaletsky has the good grace to admit that he is
frequently wrong, and wrong he is again today. If, as he proposes, interest
rates are reduced to 0 per cent and a tax on savings introduced, I very much
doubt it would have the effect he expects. Speaking for myself, if this were
to happen I would withdraw all my savings from the system and invest them in
something tangible like gold. I would certainly not spend the money on
manufactured goods or services as he expects and in addition the economy
would be deprived of the use of my cash savings. The net result would be
even less funds available to financial institutions to lend. I suspect I am
not alone in this view as the anger of savers mounts as they see the income
from their hard earned savings being whittled away. The sooner the
Government, and economists such as Kaletsky and those on the MPC, realise
that in the present circumstances cuts in interest rates are not working and
are ultimately counterproductive, the better. There are at least signs that
some financial institutions are beginning to recognise this.
David Rowe, Ivybridge, Devon
Sir, Anatole Kaletsky is right when he says that he has been wrong about so
many aspects of the current crisis but he's usually good for a laugh. His
latest bizarre idea seems to be that savers should be penalised for, well,
being savers! My wife and I (both pensioners) have modest savings that we
may need for a rainy day. Anatole suggests that we should be more or less
compelled to invest them in property, shares, or "other productive
assets" (whatever they may be). Having seen the value of our property
fall by 15 per cent in the past year and the value of our shares by around
80 per cent, due largely to the foolishness of a stupid government and
equally stupid directors I'm not sure that what he suggests would be a good
idea. Our savings are invested with banks and building societies. To the
best of my knowledge they are used (largely) by these organisations to
finance businesses and individuals. Without savers surely there would be
even less money available to combat the so called credit crunch. What is
Anatole talking about
Ian Crane, Severn Stoke, Worcester
Sir, As a pensioner whose financial situation is largely reliant on income
from hard-earned savings, Anatole Kaletsky's article caused me considerable
concern. Why should my past prudence be negated by the extavagant financial
antics of others? I could, however, be persuaded to use my cash "productively"
as long as some of the proceeds come my way. Can Mr. Kaletsky tell me what
type of investment would acheive this and still have the same level of risk
as cash deposits?
David Blackburn, Leeds
Sir, Anatole Kaletsky in his latest example of “outside the box” thinking
seems to have missed one very important point. Savers are already taxed on
interest and the double-whammy is that current inflation now means that we
are in the realm of negative “real” yields. Is that not punishment enough?
Yes, savers could all go out and spend their savings; but on what? Imported
consumer goods that are now on average 20-plus per cent more expensive
because of the weakness of the pound. The frightening thing about his
article is that there is possibly some fool in the Treasury that might take
it seriously!
John Adsett, Rochford
Sir, So, Anatole Kaletsky wants to tax savers. Would someone kindly explain to
this guru that savers put money into building societies and, in turn, the
societies make money available to suitable people who want to buy houses. In
short, no savings, no house purchases – unless of course financed 100 per
cent from the buyer's savings. With little or no house building the UK will
no longer have a building industry or allied industries. Similarly,
“savings” can be cash held in equities, helping to finance British industry
and employment levels. Mr Kaletsky fails to recognise that “savings” of this
form are invariably applied to some useful purpose by private enterprise –
they do not sit as unused cash somewhere in a “financial no-mans land” doing
nothing, or that the Government already takes its cut by taxing interest and
dividends. If savers are forced to spend, as suggested in the article, the
probability is that much of it would go on imported goods, to no real
benefit to the UK economy or employment levels. Taxing savers' capital will
inevitably reduce the real (or potential) disposable income of savers and
reduce the capital available to create much of the UK’s essential economic
activities. Mr Kaletsky’s case seems to me to rest upon the entirely
mistaken assumption that only the Government can improve the UK’s situation
by taxing and borrowing. I think history is already beginning to demolish
his Stalinist argument.
Roger Phipps, Falmouth
Sir, Anatole Kaletsky's recipe for economic recovery sounds more like a bank
or building society manager's nightmare to me. Does he not realise that
without the thrift of savers there would be no mortgages? Or is it his
desire to see those of us who have saved to avoid state dependency do
exactly what this Government has done to land us in this ever worsening
financial mess and spend, spend, spend, resulting no doubt in millions more
applying for state benefits?
Arthur Parkinson, Barrow-in-Furness, Cumbria
Sir, It does not take much imagination to work out the effect on demand in the
economy as millions of pensioners have a sharp cut in disposable income if
the Government were unwise enough to heed the advice of Anatole Kaletsky to
tax peoples bank savings. The argument that magically savers would withdraw
their funds and invest in property, now in free fall, or shares which have
lost 24 per cent of their value in the past year alone, with much further to
go, holds little or no credibility. The real need is for houses to stabilise
at a level that brings first time buyers back into the market and for share
values to find a new value that reflects the reduction in dividends we will
be witnessing during the coming year. To try to engineer some sort of ersatz
demand in the economy is just delaying the day when real demand comes back
again and this difficult and painful recession can be put behind us. Buying
shares or overpriced houses will not produce a single job and is not
productive in any economic sense. There are many projects available for the
Government to invest in which are undoubtedly productive and would create
jobs and put some demand back into the economy.
Peter Watson, London W5
Sir, Anatole Kaletsky wants savers to be punished for not spending - on
property, shares, investments. Naive and ignorant of these things as I am, I
always assumed that any money I deposited with a bank or building society
would be lent on for just these purposes. Did I get that wrong and, as I am
now tempted to do, do they just stick it under the proverbial mattress?
Elizabeth Balsom, London SW15
Sir, I write as an OAP. I read with interest Anatole Kaletsky's article but
was dismayed by part of it. My modest income comes mostly from risk-free
savings. For my age I thought that to be prudent. He suggests that those
savings and the income from them should be taxed and I should move into
property and shares. Given what has happened to those in the past year (and
could happen again) I think that would be unwise. Were his suggestions
implemented it would drastically reduce my income and that of many OAPs when
we can least afford it.
Martin Trump, Newbury, Berks
Sir, When I read Anatole Kaletsky's piece I first checked that it wasn't the
1st of April. Then I went to my bank to withdraw all my savings so that I
would not be taxed on them (I realised the Governemt could make a tax
retrospective). But I was too late, the bank had already run out of
banknotes and they said they were waiting for the Bank of England to print
more to feed a growing queue. So, in a hurry to invest in property (as
Anatole suggested) I went, with my bank statement, to a local building
society to ask for a large loan on a flat I had been eyeing but which could
have been risky in the present climate. They said my savings were sufficient
as a deposit. When I got to the estate agency I found that the price of 'my'
flat had already gone up by 20 per cent due to rapidly increasing demand so
I went back to the building society to see if my savings were still enough
to cover a larger deposit. Bless them, they said that as all their loans
were now underwritten by the Government, I could have as much as I wanted.
So I borrowed more than I really needed and, besides the flat, ordered that
imported car that I have been fancying for some time. I'll be taking
delivery when I return from my cruise.
Russell Tobin, Maids Moreton, Bucks
Sir, Anatole Kaletsky clearly has no money saved having done his duty to
Gordon Brown and spent it all. Perhaps rather he has lent it to some
deserving body shunned by the banks. For we pensioners who rely on low-risk
income from our pensions and savings to create enough to spend and survive,
lower interest means lower expenditure and lower taxes for GB. If, in a
nil-interest environment, a savings tax were to be raised as he suggests, we
would be better off with the cash under our mattress; where would that leave
our banks? Does he really believe that the mere prospect of 1.5% pa pre-tax
interest makes people save disposable income rather than spend it?
Peter Cobb, Tring, Herts
Sir, I am one of the savers whom Anatole Kaletsky thinks should be punished,
to force me spend more money or to use it more productively. He does have
the grace to admit he has already been wrong about many aspects of this
current financial crisis but on this occasion he has surpassed even himself.
Setting aside the intellectual arrogance that Mr Kaletsky holds a opinion
superior to what I consider to be productive use of my money he actually
recommends following the leadership of the Labour Government, the US Federal
Reserve and the vast majority of Keynesian economists as opposed to
following a path indicated by the commonsense of both British and US
consumers. In effect, Mr Kaletsky advocates allowing the clowns whose
incompetence and cynicism got us into this financial mess in the first place
to now become the "experts" whose advice must be followed if we
are to get out of it! I may be fortunate but, barring Gordon Brown achieving
his destiny and actually engineering a reprise of the Weimar Republic before
he is justifiably removed from office, I probably have sufficient capital to
survive even near-zero interest rates and still have sufficient reserves for
my exit to a better world via Dignitas. Like the majority of prudent and
responsible citizens I won't be bullied. I will curtail my expenditure, I
will protect and husband my resources and, if push comes to shove with a tax
on savings, I will withdraw my assets and keep them in a safe under my bed.
In all seriousness, the zero interest rate policy is not working in the US,
it did not work in Japan over a generation and it will not work now, no
matter how "uncharted" the waters or "unprecedented" the
times. What is being advocated, not least by Anatole Kaletsky, is the same
idiocy evident in the tulip mania of the 16th Century or the South Sea
Bubble of the 17th Century. We haven't really learned very much! Until we do
I'll conserve or spend my resources as I see fit without regard to any
opinion emanating from the financial sector.
P.P. Gilroy (Squadron Leader, RAF, Rtd), Bishopsteignton, Devon
Sir, One might assume from his article that Anatole Kaletsky has no savings,
including no pension. As a fool with savings, by his reckoning the only
useful service I provide is as a source of plunder to bail out bankers,
governments and profligate spenders. Once savers have no savings they will
be a burden on the former – who, by that time, will only have left a
currency which is worthless even in its own country. The logic for a fool
such as myself is to convert all my savings to cash and to hide it in the
safest place, perhaps after converting it to gold. If economists, economics
commentators and politicians want to be respected, they must see that it is
damaging to penalise a sensible section of the community, while at the same
time bailing out the stupid or dishonest – the bankers, governments and
profligate spenders. Paying no or little interest on savings has not so far
encouraged any lenders to lend. It would be better if savers were paid a
reasonable rate on their savings. We would then be able to spend our money
on the things we need, which will contribute to the economy and taxes to
help bail out the aforesaid stupid or dishonest.
J. M. Lester, Tunbridge Wells, Kent
Sir, Anatole Kaletsky admits that he he has been wrong about many aspects of
the current crisis. He goes on to suggest that we need to force those with
cash to use it productively. I believe he underestimates the fear that
exists in the country at large, whatever stance the Government or the
Opposition may take on potential solutions to the recession. That fear will
manifest itself in the virtual elimination of most forms of discretionary
spending for years to come. People will keep their cars for an extra year or
two, and not replace their fridges or televisions. Home improvements will be
put on the back burner while the value of such expenditure is lost in lower
house prices. The weak pound against the euro and the dollar will severely
curtail travel to those countries. This is a rare occasion when the more
governments do the less they seem to achieve. I am coming around to the idea
that all that is needed is time and that we should send Mr Brown and Mr
Cameron (and Mr Kaletsky) on holiday for a year or two until normal service
is resumed.
Anthony Hollis, Frimley Green, Surrey
Sir, I am very obliged to Mr Kaletsky for his advice for what I should do with
my savings, although he admits that he was wrong many times in the past. His
proposition is to spend our life savings on various objects, schemes,
government bonds, houses, etc. This will kickstart the economy so that
people can again start getting into debt and the whole vicious circle can
start all over. The only difference is that I lose my capital. My first
responsibility is my family after I discharge my duty towards my country by
paying taxes, duties and VAT. It is the Government's responsibility to
govern and defend the realm with my money. Savers are not criminals and do
not deserve punishment. Governments and Chancellors of the Exchequers are.
Dr Peter C. Brunner, London NW7
