UK must move away from reliance on consumerism warns Weale

Britons need to save more and the UK economy has to rebalance away from consumerism if we are to avoid living at the expense of future generations, Bank of England monetary policy committee member Martin Weale warned yesterday.

Weale, one of the MPC “hawks” who until last month had advocated raising interest rates to tackle rising inflation, said the weaker global economic environment and lower oil prices meant rising prices were now less of a threat.

He said it may even become necessary to introduce further quantitative easing to prevent rates becoming too low, although that situation had not yet arisen. Weale, addressing business leaders in Doncaster, went on to discuss the long-term prospects for the economy, arguing that the UK needed to concentrate on domestic investment and exporting. He argued that people must save much more towards their retirement or face being “disappointed with their living standards”, adding that it could be the younger generation that take the pain.

“Even if working life is extended by three years immediately, there will still be a shortfall of around 6 per cent in total resources,” Weale said.

Falling spending power also has implications for inflation in the long term. Weale said that ideally consumption by households and government alike would fall gradually in favour of saving, but a “sharper adjustment” could push inflation below the central bank’s 2 per cent target. It currently stands at 4.4 per cent.