National Savings

Recent Estimates.

In their Analysis in National Income 1924 (1926), Professor Bowley and Sir Josiah Stamp say:— "In 1911 the total saving was estimated roughly as £330 millions, of which 1230 millions were invested at home, 1 Too millions abroad; hence, since home-produced income was about £1,900 millions, savings for home use amounted to about 12 per cent. of that income. Total savings are even more difficult to estimate in 1924, but if we adopt the figures finding most accept ance, £450 millions is a minimum and £5oo millions is a maximum. These totals include 1135 millions for overseas investment, so that the amount allotted to home investment is about £350 mil lions, not quite io per cent. of home-produced social income (i.e., aggregate income less transfers). Total savings expressed as a proportion of total social income was on the same estimates, 16 per cent. in 1911 and 12 or 13 per cent. in 1924." The amount of British national savings has recently been in vestigated by the Colwyn Committee, who found as f ollows: "Until very recently the tendency has been to put national savings during the post-war depression very low indeed, but more mature consideration has seemed to justify an estimate of some thing like £450 millions to £500 millions, and a figure in this range of magnitude has won some acceptance.

"We are disposed to think that a figure of £450 millions to L5oo millions represents the best estimate that can be made with the data available." The equivalent of pre-war savings of £350 millions to £400 millions would, at the mean, be some £65o millions, when account is taken of the higher prices and increased population. Thus, while nominal savings have increased, real savings exhibit a decline which may amount in present money values to something like so millions to £200 millions.

The only detailed estimate before the Colwyn Committee was given by Dr. W. H. Coates for 1924, as follows:— Evidence was given that in the five years before the World War there were £482 millions of foreign investments and £381 millions of colonial investments; in the five years since the war there have been £145 millions of foreign investments, and £321 millions of colonial investments.

Working-class savings, in the view of the committee, form a small percentage of the total savings by individuals. There has evidently been a decline in saving in the income tax paying classes as a whole, but there is no clear evidence for its allocation.

Generally, they concluded that the falling off in the national savings, equal to f i so millions or £200 millions at the 1927 level of prices, gave "ground for anxiety hut not for pessimism." An estimate of British national savings more recent than that of the Colwyn Committee is given by the Liberal Industrial Enquiry, 1928, as follows:— I. Under the influence of the Government (Central

and Local) , including repayment of Government external debt, the Road Fund, Telephones, and Local Loans Fund, and capital expenditure by Local Authorities . . f 90,000,000 2. Through the accumulation of reserves by the retention of profits within existing businesses . 195,000,0°o 3. Dwelling houses and their equipment, otherwise than by Public Authorities or under other headings . . . . . . . . . 65,000,000 4. Through increased Bank loans and advances, etc. (net) . . . ...... 25,000,000 5. Through the New Issue Market for new capital expenditure at home not covered by previous headings and excluding exchanges of existing capital through the machinery of the New Issue Market 2 5,000,00o 6. Through the New Issue Market and the Stock Exchange for investment abroad (net) . loo,oco,000 500,000,00o A comparison of the two estimates brings out the difficulties of formulating estimates of this kind.

The Main Springs of National Savings.

It will have been seen from the foregoing analysis that the aggregate accumulation is to a marked extent dependent upon the undistributed profits of industrial concerns. This has great importance having regard to the sensitiveness of personal motives for saving to the in fluences of taxation or other causes. These funds are far less influenced by high or low rates of tax or high or low rates of interest, than any other section of national savings. It is true that the scope for accumulations may be rather less with high taxation, but they do not immediately attract supertax or death duties and the average board of directors is entirely uninfluenced by such considerations. There is an increasing practice of building up a solid and sound position by secret reserves and a desire to establish a policy of stable dividends. Reserves can be made in the first instance with the ostensible object of equalization of dividends, but they often ultimately find themselves solidified in investments or extensions of the business.

The second great source of saving, paradoxically enough, is taxation. High taxation levied to maintain a large sinking fund for the repayment of an enormous national debt is a very direct contribution towards the accumulated fund. When debt is paid off in the form of redemption of war-loan it is almost certain that the funds so received are not spent as income by the holder of the redeemed war loan but are reinvested. There is thus a constant stream of money withdrawn as taxation going into new objective forms.