THE Bank of England has long wanted consumers to fuel the economic recovery by spending their savings - deputy governor Charles Bean admitted as much in September 2010 - and has held interest rates down, hitting the return on consumers' savings accounts, to make sure they did.

New figures show their strategy has worked. Household savings have nearly halved in four years, according to the TUC, and the economy is indeed showing signs of slow recovery. It is hardly a sustainable form of growth, however, and has been achieved at a significant cost to individuals.

For the men and women who are the cogs in Britain's economic machine, the last five years have been anxious and difficult. People tend not to save without good reason. Whether it be for their retirement, the deposit on a house, their children's university fees or funds to tide them over if they lose their job, savings are the mark of a responsible consumer, which of course is why the Government spent so many years devising ways of encouraging people to save.

Many savers have emerged from the recession and its aftermath having lost their jobs, or watched their real-terms income drop as inflation outstrips the below-par growth in their salaries. Some are under-employed. Labour research indicates that 10% of workers want to put in more hours but cannot, in addition to which thousands of private and public sector workers are on so-called "zero hours" contracts, leaving them with no guarantee of work at all. With prices rising, many consumers have been forced to eat into their savings to make ends meet. That may please the well-paid denizens of the Bank of England, but for those whose whole financial lifeplan has been thrown off course, it is a major headache. Many have no idea when - or if - they will be in the position to replace what they have spent.

The Government has made matters much worse, whether inadvertently or not, through its Funding for Lending scheme. The scheme provides for banks and building societies to borrow money cheaply from the Government on the condition that it lends it on to fund affordable loans and mortgages. Unfortunately, that means financial institutions now have little need to build up deposits by attracting savers and are less incentivised to offer competitive interest rates on savings accounts. Even National Savings & Investments, the Government-backed bank, slashed the interest rates on three savings products earlier this summer, though those prepared to commit their money for longer periods can still achieve more respectable rates of return.

From a macro-economic perspective, given the sluggish economy all of this may make sense, but as the recovery picks up pace, old bugbears like insufficient rates of savings will raise their heads. Consumers with savings must be given a chance to make up their losses while those who have none need the opportunity to build them up. Worryingly, it is starting to look as if the Government and Bank of England are solving one problem by creating another.