Could the ‘Grey Pound’ get us out of recession?

by Dr. Ros Altmann

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Older savers and pensioners have been hammered. They didn’t cause our economic mess, yet they’ve been paying the price of trying to fix it.

Our financial crisis was caused by too much borrowing. Banks, house-buyers – and the Government – took on debts they couldn’t afford and risked going bust.

So interest rates were slashed to make borrowers’ repayments more affordable and the Bank of England created new money to push up inflation and devalue the debts.

But the side-effects of these policies have punished older people.

High inflation and rock-bottom interest rates have acted like a tax increase on savers and pensioners.

Just when we needed older people’s spending power to keep the economy going, we slashed the incomes of these generations who steered clear of debts and lived within their means.

This shattered their confidence, and cut their spending, helping to push the economy into recession.

Yet the power of the grey pound could help create growth and jobs.

We obviously need other ways to get growth going. For example, introducing temporary tax breaks to encourage companies to expand their businesses and new housebuilding programmes – including homes older buyers might want to move into. Or infrastructure and small company lending programmes financed by pension funds with Government backing.

Indeed, instead of pumping hundreds of billions of pounds into financial markets and bank balance sheets it would have been much better sending a cheque to everyone to encourage them to spend.

If older generations felt confident again, they would splash out and boost economic growth. If we keep hammering them, these grey pounds will be wasted.