To make Britain better off we need to make it pay to save...
The CBI report "Better off Britain" covers both the shortterm steps a government could take to improve living standards and where action now will allow pay to rise in the longer-term, boosting people's chances of progressing to higher skill, higher-paid work.
But the path of life is varied, and from time to time something will happen that knocks a family out of rhythm. It doesn't even need to be something as substantial as the loss of a job for one of the adults.
Perhaps the family car has coughed its last, or the fridge has packed up.
For people living one day at a time financially, one-off unexpected costs can kick-start a cycle of debt. So we need to do more to help in this area too. It is right that people build up savings, have a stake in the wealth of our society and that they are able to use those savings as a back-up when a rainy day comes.
Having assets - such as savings, a pension pot and a home - makes a big difference to living standards and how people feel. It gives you the peace of mind that you are able to replace the washing machine when it breaks, never mind more serious issues. It also enables people to invest in their own development. Over recent years it has been difficult for many people to save, but people know this is an issue and want to do more. We must help them do that.
The squeeze on household incomes has understandably made it increasingly hard for people to build assets, and spells of unemployment during the recession have meant that savings have been eaten up in many families, so as economic growth gains traction in the years ahead, we have to do more to help people accumulate resources that can act as a buffer in future difficult times.
Savings are the starting point for this. They provide not just a crucial safety net, but help people obtain other assets which can act as buffers as a family becomes more prosperous, like property or shares.
And having more assets will in turn help people improve their standard of living, for instance by getting onto the housing ladder. In the past, many workers also had a substantial investment in their defined benefit pensions, but these schemes have largely closed now.
Addressing the level of savings in the UK is therefore a must, and as we return to growth, now is the time to help more people save. Yet, we are starting from a low base. One in five people report having no savings whatsoever.
And the government estimates that the median UK saver has just PS1,300 of accessible rainy day savings.
We need a stronger political and economic focus on encouraging people to save when they are able to. And what business, supported by government, can do is help make this more attractive. In the past, this has included pioneering occupational pension savings.
Today, alongside pensions, Corporate Individual savings Accounts are a great vehicle that firms who can afford to use to help people save. Government must remove barriers to individuals taking them up by allowing employees to save in both a corporate ISA and a personal ISA if they remain with their employer.
Share schemes and employee ownership represent other ways of helping staff build up buffers - and they are also good for business success as they can increase staff engagement. Different models will work for different firms, but as with corporate ISAs, there is more government can do to help with take-up and support businesses who choose to go in this direction.
Government can help more businesses and individuals harness these schemes by tackling current barriers to take-up. There are a number of structural and informational barriers that can hold back businesses from moving towards employee ownership or share scheme models. These include a lack of awareness, lack of resources, financial constraints (e.g. the absence of a tax incentive), and the regulatory burden.
The way government can help make a real difference to uptake is by simplifying the legal, tax and regulatory framework around these schemes. Addressing the following three barriers would make a real difference. First, more flexibility in regulation for firms who are looking to diversify their shareholder mix, making it easier to adopt employee ownership or employee share ownership Plan models - in privately held firms as much as listed ones.
Second, internationally consistent voluntary employee share ownership frameworks, allowing businesses that operate globally to adopt taxadvantaged status for existing share schemes.
Finally, assessing the difficulties some smaller businesses have with these models when trying to access finance at an affordable rate, which has been cited as a factor stifling growth.
The right policy approach might increase lower-paid employees' con-fidence in saving through the workplace.
Knowing you will be able to access support when you really need it will help. This is important because the average size of a defined contribution pension pot at the moment is just PS15,000 - smaller than it should be. We must now make it pay to save.