`Windfalls will be saved not spent'
Monday 24 February 1997
According to a survey by Mori and analysis by Salomon Brothers, the windfalls will be saved rather than spent and will add just 0.5 per cent to consumption rates. Those windfalls which are spent would be used for foreign holidays and home improvements, with smaller sums spent on consumer durables, cars and clothes, the survey found.
Initial forecasts from City economists had put the boost to consumption at 1.0 per cent or more, leading many to predict a boost to the feel- good factor in the run up the general election.
While only Alliance & Leicester will have paid out its share bonanza before the election, the others - Woolwich, Northern Rock and Halifax - follow in quick succession.
The 9 million or so members of Halifax vote today on the society's pounds 14bn flotation plans, which on its own provides the single biggest boost to share ownership in the UK.
The effect of the Halifax's payout in June, when 8.5 million people will receive shares worth an average of pounds 1,300 each, combined with the windfalls from the other societies, has been complicating economists' forecasts for spending, economic growth and inflation over the next year or so.
The sheer scale of the bonanza is the problem as, theoretically, if all the shares were cashed in at once, the payouts would be equivalent to a temporary 11p cut in the basic income tax rate.
"If all of the windfalls are spent, adding about 4.0 per cent to consumption, there would be massive knock-on effects on capacity use, prices and the current accounts," the Salomon researchers said.
The Mori poll established that, in general, the people expecting to receive windfalls were middle-aged and richer than the overall population.
More significantly, when broken down in social class - used as a proxy for income and wealth - the survey showed that 45 per cent of the high income AB group expect to benefit from the payout. Just 17 per cent of the DE, low income, group expect to receive free shares.
The biggest payouts are also expected to go to people who are middle- aged, richer and more financially sophisticated, which suggests that a large proportion of the funds will be saved rather than spent.
The survey showed that only 12 per cent, or one in eight, of those who expect to receive a windfall would sell their shares immediately, while a similar number intended to sell the shares over the next 12 months.
This implies that only 10 to 15 per cent of the windfalls will be spent, much lower than the 25 per cent which had been used for previous estimates.
According to the Salomon analysts this suggested that current estimates of GDP growth of 3.4 per cent may now be too high and that interest rates may only need to rise by half a percentage point, rather than the 0.75 expected at the moment.
"The survey results - and assuming that sterling stays around current levels - tilt the odds in favour of a total hike of 0.5 per cent," the research said.
Halifax's special general meeting at the Sheffield Arena today is likely to see protests from disabled groups that are furious over the denial of payouts to people whose accounts are held in trust.
But even though more than 50 per cent of the society's investing members - more than 3.3 million - must vote in favour for the flotation to proceed, such protests are unlikely to derail Halifax's flotation plans.
- 1 Germanwings crash: Police make 'significant discovery' at home of co-pilot Andreas Lubitz
- 2 JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
- 3 The West has it totally wrong on Lee Kuan Yew
- 4 #FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
- 5 Jeremy Clarkson calls on trolls to leave producer Oisin Tymon alone: 'None of this is his fault'
Germanwings crash: Police make 'significant discovery' at home of co-pilot Andreas Lubitz
Andreas Lubitz: Who is Germanwings co-pilot who 'locked out captain and crashed flight 9525'?
#FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
Russia unveils plans for high speed railway and superhighway to connect Europe and America
Cate Blanchett loses temper during interview: 'That's your f**king question?'
Nigel Farage brands LGBT activists 'filth' and 'scum' and accuses them of scaring away his children after they invade his local pub
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Russia threatens Denmark with nuclear weapons if it tries to join Nato defence shield
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Germanwings plane crash live: Andreas Guenter Lubitz intentionally crashed flight 9525 into the Alps in act of mass murder and suicide – latest
iJobs Money & Business
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...
£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...
£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...