Judge Brown's Budget on his efforts to curb the Micawbers

How do you gather up a windfall? The London markets are waking up to the fact that something has to be done to stop the windfall gains from the flotation of the building society and mutual insurance groups from feeding through into additional demand.

About time too, you might think. The problem has been evident for the best part of a year and economists have been trying to calculate the impact for several months. But it has only been in the past few weeks that financial markets have cottoned on to the full practical implications. These are: one, that interest rates will have to rise quite sharply through this year even if inflation continues to behave itself, simply to mop up these savings; and two, that if the new Chancellor wants an excuse to raise personal taxation, the scale of the windfalls gives him a half-respectable one.

But of course both options are extremely unsatisfactory. Increasing interest rates has an impact on the whole economy, not just people who have received windfalls, and in the first instance at least tends to hit companies as much as individuals. In any case it would not have any significant direct effect on the people involved: people who suddenly find an extra pounds 6,000 in their accounts are not going to be greatly influenced by the fact that base rates have gone up half a point.

Increasing taxation is also mis-targeted, for it too affects the whole economy, not just the gainers. But in addition there are powerful political, moral and practical objections to using the tax weapon. The political objections are obvious: the incoming government indicated that it would not increase taxation, certainly in any significant way, before the election, unless there was some unforeseen need to do so. The moral objections lead on from this: there is no need, and the money would come in large measure not from the gainers but from people who have "won" nothing at all. Revenues are coming in well above forecast. Notwithstanding the controversial use of the Audit Commission to re-examine the Treasury's figures, even on its (surely overly) cautious assumptions, public finances are heading for a surplus in the early years of the next century.

And the practical argument is that no conceivable rise in taxation is going to make any dent on the size of the windfall. Say personal taxation were increased by a net pounds 3.5bn, the maximum anyone has suggested. That would only be equivalent to 10 per cent of the windfall gains.

So what is to be done? There will have to be some rise in interest rates anyway to curb incipient inflationary pressures, but the real need is to mop up savings. Judge the forthcoming Budget by the extent to which it does that.

What will Gordon Brown do? Well, we know that there will be a new scheme for long-term savers so that people establish some form of life-time savings account - that was promised before the election. That is extremely welcome. What we do not know is the details either of the scheme itself or how it will fit in with existing savings incentives. Will this be additional to existing savings incentives such as PEPs? Presumably it will because it makes no sense to create a new incentive but discourage people from using existing ones. To do so would have little net impact on savings. But will some of the cost be clawed back by limiting tax incentives on saving for pensions? Presumably yes.

More important still, will the new savings scheme be contractual? Will people have to save a regular amount each month or year? It is important that it is not, partly because the short-term problem is the need to mop up the lump sums of the windfalls; but also because the whole structure of employment is moving towards a situation where people can expect to receive lump sums (from bonuses, share options and, sadly, redundancy) rather than have secure monthly salaries. We need a savings system which enables people to stash it away when they can afford it, and not have to scrimp to keep a savings plan going when they can't.

This is a terrific opportunity to cope with a one-off problem in a way which brings long-term continuing benefits. There are several powerful reasons for wanting to encourage more saving in the UK. Personal savings are rather low by international standards, though contractual savings through funded pensions and home purchase are unusually high. Associated with this is unusually high consumption levels: we consume more as a percentage of GDP than most other developed countries, and have somewhat low investment rates.

Getting people to save more does not automatically increase investment, and in any case investment as conventionally measured is not always the economic good it is sometimes made out to be. Not only is a lot of investment wasted: our Sixties tower blocks now being torn down, Japan's Eighties high-definition analogue television, maybe even the millennium dome. So much of our capital now is human capital rather than physical plant and equipment, that it is hard to distinguish investment from consumption.

But whether you buy the investment argument or not, the combination of growing economic uncertainties and demographic change should make us want to encourage higher savings rates. At some stage in the next year we can expect the results of the review of our pensions system, led by Frank Field, which may well incorporate an element of compulsory contractual saving.

But now the need is to use this unique time to encourage discretionary windfall saving. It is not often that people in this country have pounds 35bn swishing around that they didn't know they had. In fact it has never happened before.

Looked at in the wider context, this debate about whether taxes should go up by a couple of billion or interest rates by a quarter or a half percentage point is really pretty unimportant. A couple of billion in an economy of pounds 800bn is tiny; the odd half a per cent on short-term interest rates is barely relevant. These are blips on the radar screen. But pounds 35bn is big. The great looming issue is how to alter the savings habits of millions of people; to use the bonuses as a way of kick-starting a process of social change. And there is not a lot of time.

We are a nation of Micawbers. Given half a chance the Great British Public will have spent the windfall before the Chancellor has found a way of persuading us to do otherwise.