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Speaking at the Tax Incentivised Savings Association annual conference in London last week he told the audience of industry professionals the savings culture had declined since Labour came into power in 1997.

Mr Hammond said: "We are going into this recession without preparation."

Lack of savings, the trillion-pound debt mountain from public and government spending and the effect of the recession on the wider economy were some of the issues discussed at the conference chaired by Justin Urquhart Stewart, marketing director of Seven Investment Management.

Cliff van Tonder, head of business development in wealth management at BNP Paribas Security Services, questioned whether the savings cycle was broken and irreperable.

He surveyed more than 1000 IFAs and investors about their attitudes to the recent market turmoil.

Mr van Tonder said even though the results were unscientific it found that appetite for risk had decreased. It showed IFAs' top three investments were equity, cash and bonds, while investors were mainly investing in cash, bonds and property.

Also at the conference, Monique Melis, who specialises in international regulatory issues for Kinetic Partners, which advises asset managers on regulatory, audit and compliance issues, said because US and UK regulators had different approaches to regulation, this would effect international regulation efforts.

She said the FSA used a principles-based approach while the US regulator, the Securities and Exchange Commission, relied on rules and fines.

She said since 1997 the FSA has handed out £100m in fines, compared with the SEC that had accounted for £21.6bn in fines.

She said: "Regulation of financial markets started in 1929 with the Wall Street crash. Today we have had the most dramatic government intervention since 1929. Deregulation in the US, technology and the ability to move money caused the instability in the markets.

"It is simplistic to blame the regulator for the financial mess. Lord Turner, chairman of the City regulator, said he will hire more people and the regulation will be beefed up."

On a more positive note Hal Austin, senior editor of Financial Adviser, said IFAs had responded well to the challenge set by Sir Callum McCarthy, the former chairman of the FSA, in Gleneagles in September 2006.

It was Sir Callum's infamous Gleneagles speech that laid the groundwork for the overhaul of the retail distribution business model. The then chairman of the City regulator launched a bitter attack on the distribution model of retail financial products.

He said: "The IFA industry is in a much better place than we were in September 2006. IFAs are not the villains of the piece, but one of the good guys."