The moral effect of bailing out borrowers

I worked for fifteen years in the City to make enough to retire in my forties.

That's not a huge amount. I never got a mega bonus. I earned a bit more than middle managers in British Telecom, but often not much. But by dint of moving out of London and living fairly carefully, I've managed to go freelance and run my life the way I want to, without having to earn a wage.

Now I could of course have done what Gordon Brown seems to want us to. I could have said: This is not enough. I NEED a bigger house in a posher area. I NEED a bigger car. I NEED a second house and I even need to pay £3.50 for a pint of Greene King IPA. So I'll borrow, and I'll carry on working till I'm 68, so that I can reflate the economy, and when the chickens come home to roost, I'll depend on the government to stop the banks repossessing my house. And you know? It would have worked.

We had an unsustainable boom. Now, the concern is how do we make it happen again.

The problem is the moral hazard of rewarding stupidity. If we bail out the borrowers - if we insist that mortgage rates must be lowered to help the borrowers - if we insist that the banks must lend to businesses on the brink of going under - what are we doing? We're saying - spend, spend, spend, the government will sort out the bill.

Conversely what we're saving to savers is simple. Don't bother.

So Gordon Brown, you are on notice.

I am going to spend my savings. I am not going to work. I am going off on holiday. Saving the British economy is not my business.

I am not going to earn money, because I don't need to. I am not going to lend my money to banks at 1% and then pay tax on that to bring my total income to about half a percent. I am not going to stick money into the stock market.

No, I'm going to spend it having a good time. Having a good time at cheap prices. And having a good time somewhere else, because in the UK it rains, it snows, it's cold, the hotels are too expensive and the service economy doesn't have any service left in it.

And just try to bloody tax me on the income I'm not making.

Now this is an extreme attitude and actually as editors and PR people know I'm continuing to write articles, and I have a novel coming out this spring, and I haven't given up entirely. But if every saver in the UK is now feeling like this - and I think many of them are - how are we going to increase the savings ratio? Which is one of the major structural changes that needs to be made in the economy if it is to recover on a long term basis.

We have reached the point at which no one thinks it is worth saving.

• after Equitable Life, the stock market collapse, and the collapse of a number of occupational pension schemes, who trusts pensions as a savings vehicle? Besides, if you are one of the lower quartile of private pension savers, there's evidence that suggests you will be worse off, because means testing means you will only have managed to replace the minimum income guarantee - effectively you've paid for something you would have got anyway.
• after the 2001 tech collapse and now the 2008 stock market collapse, no one trusts the stock market with their savings.
• and now we have banks collapsing, and property prices collapsing. Which leaves tins of baked beans as possibly the only alternative to keeping your cash under the mattress.
  
• Worst of all, why bother putting money in a bank to get a measly 1%?

Yet look at a number of issues and the government still expects us to save. We ought to be putting money in our pensions, we are told. Oh yeah? We ought to be saving for our old age. We ought to be saving for care homes when we're old.

Well, there's something wrong with that strategy, isn't there? When you punish the savers and then you tell them they ought to save, which of those policies is real and which is moonshine?