Are we saving enough?  We have a sneaky suspicion you know the answer to that question.  But here is something to make you think, our savings need to be greater to the tune of £1.4 trillion, or we are leaving a massive burden on future generations. That’s what Martin Weale, the Director of the National Institute of Economic and Social Research said in the second Peston Lecture given at Queen Mary College yesterday.

“In France, Spain and Italy,” says Mr Weale, “wealth and saving are close to adequate. Consumption needs to fall no more than 2 per cent  in France, Italy and Spain. But the United Kingdom has a long history of low saving and needs to cut consumption by 8.5 per cent  if today’s adults are to avoid imposing a burden on future generations. The total wealth shortfall in the United Kingdom is over £1400bn, or the equivalent of about thirteen Northern Rocks.”

Mr Weale added, Working five years longer removes the affordability problem faced by current adults in the UK. But the youngest group of the population would still find that they need to cut their consumption by just over 3 per cent  from current levels.”

The results for the UK are based on the assumption that savings earn a real return of 4.4 per cent  p.a. This is the average in the UK over the period 1989-2006 for the economy as a whole. Capital gains on land and housing are excluded from the calculated return because they represent a transfer of resources from future generations to the present.

Mr Weale said, “The Treasury has never discussed Britain’s overall savings position in the past and today’s budget follows the tradition of not paying proper attention to the sustainability of current consumption levels. These figures demonstrate the precarious position our economy is now in. The macro-economic framework should be amended so that policies are in place to ensure that we make adequate provision for ourselves without burdening future generations.”