William Kay: An obvious vehicle to make the British into a nation of savers

The gap in understanding between the haves and have-nots in Britain was vividly brought home this week by the remark attributed to Martin Weale, the director of the National Institute for Economic and Social Research.

The gap in understanding between the haves and have-nots in Britain was vividly brought home this week by the remark attributed to Martin Weale, the director of the National Institute for Economic and Social Research. Mr Weale said: "When children and young people talk of saving it may be for a toy or a holiday, which of course is not saving at all."

Note that insouciantly placed "of course", as if this was almost too trivial to point out. I too have toiled in the groves of economic study, though on far lower slopes than Mr Weale, known for such arcane works as Testing Linear Hypotheses on National Account Data. You don't have to burrow far into the subject to have it dinned into you that savings equals investment, automatically and by definition.

But all saving is ultimately postponed consumption, no matter what use it is put to in the meantime, whether invested in Vodafone shares, Ming vases or an ING account. The fact that "children and young people" might not postpone their consumption for very long does not make it any the less saving: better that than the prevailing habit of buying first then borrowing to pay for an item.

While postponing consumption might not be good news for the economy, it is a vital cultural change for thousands of people's individual finances. If you really want to splurge at Christmas, for goodness' sake start putting away a few pounds a month from January. It will soon mount. The good news, according to National Savings & Investments, is that more than half of us save regularly, and the amount put by rose from £151.94 to £162.32 between September and last month.

Even more encouraging, the present crop of 16-24-year -olds are the best age group at saving - nearly a tenth of their income. Who can blame them, you might say, faced with the financial scandals and uncertainties that have been popping up like aunt sallies at a fairground in recent years.

Many of those under-25s will be hit with student debt, a mortgage and children to pay for, but according to NS&I even the highly vulnerable 25-34 age group save a second-best 8p in a £1 of income.

The Government, whatever Gordon Brown says, is still not doing enough. After a couple of years piloting the so-called Savings Gateway, there is to be no more than a further pilot offering to match savings with a pound-for-pound contribution from the state.

NS&I is the natural vehicle to lead Britain from borrowing to saving: it offers simple products backed by a government guarantee. Even Richard Saunders, head of the Investment Management Association, says that it has great potential for poorer savers.

But every time it looks as though NS&I is about to break new ground, Mr Brown receives anguished calls from the banks and insurers muttering about unfair competition. They cannot match its guarantee, and their cost base makes it impossible to compete profitably. I think Mr Brown should call their bluff, and dare them to complain about NS&I to the Office of Fair Trading. They won't.

* Call me a suspicious old curmudgeon if you like, but I have doubts about Gordon Brown's apparent sudden conversion to individual savings accounts, or ISAs.

He said last week that he is to hold consultations on extending the present limits - £7,000 for a maxi ISA, £3,000 for a cash ISA.

But here is one of history's greatest chancellors, at the height of his powers, backed by a massive House of Commons majority, proposing something that, as far as I know, absolutely no one opposes.

So what, precisely, is there to consult about? I fear that "consult" is one of those political weasel words that might let him wriggle out of keeping his promise after the general election.

Decline in the dollar keeps shine on gold

For those of you who followed my advice last July to buy gold at $391 per ounce, the present $437 adds up to a nice Christmas gift - although in sterling terms it has risen from £215 to only £226, thanks to the decline in the dollar.

But that dollar depreciation is the main driver for the gold price, which in the long run has always maintained its real value. So the widespread predictions of further falls in the US currency next year should continue to keep gold shiny. The calculation is whether, as for the past four months, gold's rise will outpace the dollar's fall.

It should do. Even though the panic surrounding dearer oil has largely subsided, and the US presidential election has been resolved, there will still be enough uncertainty around to keep people piling into gold as the classic funkhole, particularly while equity markets continue to perform so anaemically.

Mind you, gold will have to go some to beat the declining dollar. Michael Hughes of Baring Asset Management, an occasional columnist for The Independent, believes that it will fall from its present $1.93 to the £1 to $2.30 within two years. That would be a drop of nearly a quarter, justifying the gold bugs' growing belief that bullion will soon be worth more than $500 an ounce.

So if you hold gold you should stick with it. And, if you agree that there is another $50 or more to go for, it is still worth buying.

w.kay@independent.co.uk