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As you know, we have all got to save more. Pay off debt, and start preparing for our retirement. Errr, this is odd. Yesterday, in an interview on Channel 4 News, Charlie Bean, the Deputy Governor of the Bank of England, called for consumers to go out and spend, and if necessary eat into savings. It would appear that what he was really saying is this: ‘To all patriotic citizens of the UK, spend, spend, and spend more money than you can afford, your country needs you.’ What did he really mean, and is he right?

“We used to believe you could spend your way out of recession,” said James Callaghan in the days when he lived at Number Ten Downing Street. He added: “I tell you in all candour, this option no longer exists.” Jimbo was expressing New Labour sentiments, before the dream of New Labour was much more than a twinkle in the eye of Tony Blair, Gordon Brown and John Smith.

For a while in 2008, it seemed as though the government of Gordon Brown had rewound the clock to a pre-Callaghan era, when it did indeed try and spend its way out of recession. Well, that idea isn’t very popular now. Only yesterday, the IMF, that most competent of economic institutions which gave such wise advice during the build up to the credit crunch in praising the innovation called mortgage securitisation and heaping praise on Gordon Brown’s “no more boom and bust strategy”, blew kisses to George Osborne, and congratulated him on his deficit reduction plan.

So, we can’t spend our way out of recession using the government as our prop. Maybe we can try the consumer instead.

Mr Bean said: “I think it needs to be said that savers shouldn’t necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit.”

The bank’s number two man also said: “… older households [which] have actually benefited from the fact that they’ve seen capital gains on their houses. It’s very much swings and roundabouts. At the current juncture, savers might be suffering as a result of bank rate being at low levels but there will be times in the future – as there have been times in the past – when they will be doing very well out of the fact that interest rates are at a relatively high level and I think that’s something that savers should bear in mind.”

Of course, savers are furious with the Bank of England. After all, in real terms interest rates are currently negative. And at face value it does seem that the Bank of England man, who boasts a surname which is just too good to be true, is being irresponsible. After all, wasn’t it irresponsible lending that created the financial crisis in the first place? It would appear Mr Bean is trying to encourage people to solve a crisis caused by too much debt, by running up more debt.

But actually, he also said: “What we’re trying to do by our policy is encourage more spending. Ideally we’d like to see that in the form of more business spending.” He is right there. Businesses are not spending enough, and this may be one of the key problems today. It is like that in the US, too, where both wages and investment are wilting. According to Capital Economics, over the last ten years the amount of money returned to shareholders, either in the form of dividends, net equity issuance or cash-financed mergers and acquisitions, was greater than their total earnings over the same period.

So when Mr Bean says he wants business to spend more, he is dead right. He then added: “Part of the mechanism that might encourage that [more business spending] is having more household spending so in the short term we want to see households not saving more but spending more.”

And that’s the key point. It is not more consumer spending per se that Charlie Bean wants, but more business spending, and he reckons that consumers can encourage business to do more. He may or may not be right, but see his comments about wanting consumers to spend more in the light of the need to get business to up the ante, and maybe his words were not quite as irresponsible as they at first seemed.

As an aside, he also made an interesting comment about the prospects for rates in the longer term. He suggested low rates would be with us for some time, but then said: “I would certainly not expect the level of bank rates to stay very close to zero for a decade or more.” (Why do these Bank of England types love talking in double negatives? – We certainly do not think it would be a bad idea if people didn’t use double negative sentences more often.)

The real snag with getting business and investment up is that the money that is available to fund investment is not being made available to the right institutions. It’s the old story. The only way you can get the bank to lend you money is if you don’t need it to. The banks say they are willing to lend, but businesses don’t want to borrow. In reality, what they are really finding is that the companies they deem to be a good credit risk don’t want to borrow, probably because the reason why they are considered a good credit risk is that they have got oodles of cash. The companies that do need funding, however, are the ones that are being starved of cash.

Lending money to a business just to prop it up can be a bad idea. But lending money to businesses that want the cash to invest in expansion or new ideas is precisely the kind of lending the UK needs. It is not reckless consumer spending that the UK requires, but more lending to innovators. And for that it is an irrelevance whether interest rates are zero or five per cent. It is the availability of spondulicks that matters, and our banks are failing us. The Bank of England must do more to encourage the right type of lending, and Charlie Bean’s comments didn’t give the slightest hint that the central bank has plans to do this.