The Great Debate UK

“Always a borrower, never a lender be”

-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own and do not constitute investment advice. -

The first chapter of the Eurozone crisis story has ended as expected, with the Germans (and Dutch and Austrians) left to foot the bill, repeating the pattern we have seen in the last couple of years, at the micro and macro level: savers bailing out borrowers, the solvent rescuing the insolvent, the responsible minority rescuing the feckless majority from the consequences of their irresponsibility. No wonder banks don’t want to lend and firms don’t want to invest.

Apart from the injustice, the really damaging aspect is the message it sends out loud and clear about the way modern Western democracies operate. The younger generation will be noting the lesson — even if David Willetts, the Minister for Universities, is not — that those who work and save must bear the burden of carrying those who do neither, because nowadays the welfare state operates at all levels: personal, national, global.

The choice is, as they say, a no-brainer.  Shakespeare’s Polonius needs updating: “Always a borrower, never a lender be”.

This state of affairs is not something sudden, but rather the culmination of at least half a century of evolution, as the dynamics of democracy led us from a society based on the principle that nobody should be disadvantaged by accident of birth or chance, which was agreed in all Western countries by the end of World War Two, to the current consensus that nobody should be disadvantaged by indolence or fecklessness.

With its corrosive and cumulative effect on the will to work and save, it is a philosophy which local governments could never have afforded to embrace –- so they had to be bankrolled by central government. Now that central governments in turn are going bankrupt under the burden, they are left to scour the world for a sugar-daddy willing to bail them out, like a struggling Premier League football club looking for a billionaire with money to burn.

The devil will be in the Budget detail

– Fay Goddard is chief executive of The Personal Finance Society. Any opinions expressed are her own. —

Though it’s a cliche to say that a budget is eagerly awaited you can be forgiven for saying so this time around. This year all eyes and ears will be focused on the Chancellor’s economic figures and forecasts. The big question is how will he balance the books – cut public spending or raise taxes? In the run up to an election cuts are ideal but needs must. What will it mean for personal finances?

One of the big questions being asked is whether Chancellor Alistair Darling will do anything to help the plight of savers. Some of the hardest hit by the drop in interest rates have been pensioners relying on savings generated income. It seems likely they will receive some support with whispers suggesting an increase in the pensioners’ tax allowance but this will do little for the majority affected. There is also speculation that the ISA limit of £7,200 will be raised in an effort to attract more savers. Action savings is a delicate balancing act as the Chancellor is understood not to want to reduce consumer spending in such a way that it slows the recovery.