What consumer boom? Blow to Chancellor’s plan for recovery as only three per cent of UK households plan to spend savings in 2021 – while one in five plan to rein in spending
Only three per cent of UK households plan to spend savings built up during the pandemic this year as the Chancellor’s “out of touch” strategy for recovery starts to unravel.
Last month, Chancellor Rishi Sunak said he “felt good about the bounce back” because “people have been sitting at home, building up some savings hopefully and we would like to go and spend them when we get back.”
But Labour analysis of a Bank of England survey suggests the Chancellor is wrong to pin his hopes solely on a consumer boom to get Britain on the path to recovery – and that instead he needs to act now to build confidence in the economy.
The survey shows that one in five UK households have run down their savings over the course of the pandemic, and only 10 per cent of the households that had increased their savings (less than three per cent of the whole sample) actually planned to spend the money they had saved.
After the UK suffered the worst recession of any major economy in 2020, one in five households actually plan to rein in how much they spend over the next twelve months.
Two in three adults think the economy is going to get worse over the coming year, with more than a third thinking the situation will get a lot worse. British workers are also gloomy about their job prospects, with one in five worried that they might lose their job in 2021.
This collapse in confidence in the UK economy is likely to put the brakes on any recovery this year. But with the pandemic continuing to rage, Labour is warning that families across Britain are yet again facing a series of cliff edges in support over the coming months.
- 29 January: Deadline for applications for the third grant under the Self-Employed Income Support Scheme.
- 21 February: End of eviction ban.
- 6 April: Government cuts £20 a week from Universal Credit.
- April: End of ban on home repossessions.
- April: Council tax rise imposed by Government, despite promises to support councils through the pandemic.
- 30 April: End of furlough scheme.
- 2021/22: Start of key worker pay freeze.
Labour is calling on the Government to take urgent action to build confidence in the economy by:
- Keeping the Universal Credit uplift in place.
- Fixing the holes in the UK’s safety net.
- Using some of the £2 billion handed back to government by supermarkets in business rates relief to help hard-hit businesses like those in the hospitality sector and people who have been excluded from support altogether.
Labour has also called for urgent action to kick-start the recovery by bringing forward at least £30 billion in planned capital investment over the next 18 months as part of a rapid stimulus package to support at least 400,000 clean, new jobs.
Anneliese Dodds MP, Labour’s Shadow Chancellor, said:
“After the worst recession of any major economy, the Chancellor is pinning all his hopes for recovery on a consumer boom.
“But just three per cent of UK households who have saved during the pandemic plan to spend those savings in the year to come, while one in five are planning to rein in spending. This shows how out of touch the Chancellor is from people’s daily lives.
“Households are already tightening their belts because they are worried about the future. Now the Chancellor wants to hit them with a triple hammer blow of council tax rises, pay freezes and benefit cuts.
“Instead he must reverse these economically illiterate decisions, and take urgent action at the Budget in March to secure our economy, protect our NHS and rebuild our economy.”