Why are the British so bad at saving?

Gulp. Many of us have a piggy bank that is either empty or perilously close to it.

According to a new Financial Conduct Authority report into savings, one in five Britons have less than £1,000 in the bank, with one in 10 of us having no cash savings at all. Should the wolf ever come to the door, the bailiffs won’t be far behind.

The watchdog’s comprehensive “Financial Lives” survey also found 7.4m people (14 per cent) felt heavily burdened by domestic bills and credit commitments, 5.5m (11 per cent) had missed a payment over the previous 6 months,14.6m (28 per cent) were either not coping financially or finding it tough, and 5.8m (11 per cent) had no disposable income after all the essentials were accounted for.

Faced with an economy that is stubbornly slow to grow and with unemployment on the rise, the seeds of a future crisis are already in the ground. The booming popularity of buy-now, pay-later (BNPL) loans is the fertiliser.

Though the number of people without rainy-day cash hasn’t increased much since the survey’s last outing, the number resorting to loan companies like Klarna, Afterpay and Affirm has exploded – increasing by 2m to 11m people.

Supporters argue that the ability to delay payments, usually up to 30 days later, or across three monthly instalments, is a useful service that consumers value and can help with financial planning.

If, say, a washing machine or an oven or some other essential appliance blows up, it could make all the difference to one of the one in three Britons with less than a grand to cushion them against just this sort of emergency.

BNPL could also be used to spread the cost of buying clothes for a job interview, the kids’ school uniform or educational equipment.

What about Christmas and birthday presents? That new outfit you had your eye on for the big night out? Some new holiday gear? See how we’ve gone from a useful tool to help with emergency purchases to the shopaholic’s crack cocaine?

The FCA says BNPL is particularly popular among single parents, 40 per cent of whom have used it, and younger women (35 per cent of those aged between 25 and 34).

The ease with which one can access what the FCA prefers to call “deferred payment credit” – because, remember, these are loans – is frightening because they can oh-so easily push people over the edge. This sort of credit is a means of putting off a reckoning, and making it worse, as debt follows debt follows debt. Peter is robbed to pay Paula and then Paula is robbed to pay Phil.

One welcome development in consumer finance is that most lenders have, with a certain amount of prodding, got much better at managing customers struggling to handle their debts. But that’s because they are quite tightly regulated; BNPL loans, by contrast, are not.

How much of a duty does the state have to protect people from themselves? When it comes to deferred payment credit, to what extent should people be nannied? Shouldn’t consumers be free to make their own decisions on whether or not to take out such a loan? If they get into trouble, is it really the job of the state to guard against the consequences of their own actions?

This is a worthwhile debate. But here’s the thing: it is widely accepted that purchasing risky or dangerous products that can hurt people should be regulated. And we do that when it comes to, say, tobacco, alcohol and/or drugs. Ditto gambling. Complex financial products like mortgages or investments, too.

The FCA survey tells us Britain has an enormous number of people who are highly financially vulnerable, and that the booming BNPL industry is also very popular with them. The potential for an ugly situation to develop is staring us in the face. A consultation into regulating the sector was launched last year. It is time for ministers to get their skates on.