Chancellor mustn’t punish me for saving during pandemic

Never in my darkest nightmares last spring did I think we would be starting this year in virtual lockdown. Foolishly, I thought coronavirus would have long been overcome and that life would now be pretty much back to normal. How wrong I was. 

Although the vaccination programme offers a big injection of hope that an end to the pandemic is finally in sight, lockdown remains. All rather depressing – and all somewhat scary. Too many deaths. 

For me, life has become a set of questions: should I go out and buy milk and a newspaper – and run the risk of being stopped by the police? 

Do I want to be abused by someone for not wearing a mask outside? 

And should I go out for a run – fearful that someone in an official looking yellow high-vis jacket may at any moment suddenly appear and accuse me of violating lockdown rules by panting too loudly? Oh dear. 

Yes, lockdown this time around is excruciating. But with high death rates, more virulent strains of Covid-19 to contend with and an NHS at near breaking point, I fully understand the need for it. 

Yet lockdown has lost the novelty factor that enabled most of us to get through last spring’s confinement.

Back then, how loudly many of us clapped every Thursday night in recognition of the sterling work done by the country’s magnificent army of NHS workers – brilliant, exhausting and life-threatening work that continues to this day. 

And how generous we all thought the Government was in terms of protecting millions of workers from redundancy with its imaginative furlough scheme. 

Now, mass vaccinations excepted, it all seems so much grimmer. More rules to obey, more forceful policing, more fines and – to compound matters – pretty foul wet weather to wake up to. It could well be April before we emerge from lockdown – maybe, even later. 

I can’t wait for a semblance of normality to return – the chance to visit my mother in the Midlands. We were meant to spend Christmas together at the splendid Belfry Hotel & Resort nearby, but lockdown kiboshed that. 

She’s desperately lonely and if it wasn’t for the fact that my younger brother lives nearby and pops in to see her – usually with a bottle of Aldi’s French chardonnay (£4.99) – I dread to think what her mental state would be like. Thankfully, she’s just had her coronavirus jab and, bar a sore arm, is feeling a little more resilient. 

I’ve also missed the cinema, theatre, live music and going to watch football. Although as a longstanding season ticket holder at West Bromwich Albion, I’m not sure I’d want to spend money watching the current team, who two weeks ago made Blackpool look like World Cup winners in the third round of the FA Cup. 

Yet lockdown has not been 100 per cent bad. Like many people, I have been able to use it to practise more of what I preach every Sunday as this newspaper’s personal finance editor. Yes, I’ve saved more, invested more and paid off a chunk of my mortgage that I wouldn’t have been able to do if it were not for lockdown. 

Although I’ve spent a fair amount of the past ten months commuting to work, my spending has come crashing down. I can’t go to the theatre twice a week as I used to. 

I’m no longer wining and dining or getting on expensive trains to go up to see West Brom every fortnight. 

I’ve even saved a small fortune by not entering organised running races at weekends – events that would take me all over the country in search of a hopeless quest for a ‘PB’ – personal best. As a result, my tax-friendly Isas have never been healthier. My mortgage is shrinking quite nicely. If it were a glacier, I would be alarmed. 

Of course, I’m not alone. According to research conducted late last year by the Bank of England, 28 per cent of households surveyed have accumulated additional savings as a result of the pandemic. This compares to one in five who have depleted their savings – in response to the loss of household income caused by unemployment. 

The survey confirmed that a higher percentage of ‘high-income’ households are saving more compared to ‘low-income employed’ households – 42 per cent versus 22 per cent. Interestingly, 36 per cent of retirees have upped their savings. 

Last week, data from the Office for National Statistics (ONS) confirmed these trends. As part of its ongoing study into the impact of the pandemic on the country’s personal and economic wellbeing, it calculated the proportion of people who said at the pandemic’s start (March) that they would be able to save for the year ahead. It then compared this figure to the number who said they were still saving at the end of last year. 

Those groups saving more included households with incomes above £20,000, the self-employed, employees, homeowners with or without mortgages, and those aged 30 to 59 and 60-plus. Those saving less include renters, low-income households and the under-30s.

In the past few days I’ve spoken to friends – self-employed and employed – about pandemic saving. Like me, they have managed to squirrel money away. I asked them whether (like me) they feel a tinge of guilt while others – maybe their neighbours – struggle to make ends meet. Their answer was an emphatic ‘no’. 

They argue their nest-building is imperative because they have no idea what the future holds. 

They are frantically building financial defences in case their work either dries up or their services are no longer required as the economy shrinks in lockdown – and then adapts to a post-coronavirus world. 

If they come out of the pandemic with their jobs intact, they say they intend to spend some of their newly acquired savings – vital if the economy is going to move into growth mode. Are these views dispassionate? No, just pragmatic, although my friends did also say they are now routinely giving more to charity. 

No doubt government ministers – and Chancellor Rishi Sunak in particular – will come under pressure to target pandemic-empowered savers such as me, my friends and those groups identified by the ONS. 

Given that we could be seen as ‘beneficiaries’ of lockdown (a tag I vehemently dispute), Sunak might bend to pressure from the Left and radically shrink the tax breaks available to savers. 

The March Budget would give him such an opportunity. 

At risk could be the generous annual Isa allowance of £20,000 – a tax break that allows savers to build their own mini tax havens. Some believe that the allowance is set too high. 

Also vulnerable is the tax relief given on pension contributions that means a £100 payment into a pension only costs a basic rate taxpayer £80 and a higher rate taxpayer £60. Profits made from share disposals could also be taxed more heavily. 

Indeed, don’t rule out a new wealth tax on people with personal assets in excess of £500,000. 

Not all readers will agree with me – for example, one told me last week that Sunak should ‘tax as heavily as he must’ to deal with the big gap between the Government’s mind-blowing levels of spending and its shrinking revenues. 

But Sunak must resist the urge to punish prudence. 

Significantly, the pandemic has shown that far too many went into lockdown with inadequate financial buffers. Rather than deter long-term saving, Sunak should encourage it – across all age and income groups. So please, Rishi, no savings nightmares in your March Budget.