We could fix our economy by giving every man, woman and child £6,000 in cash

It's hard to believe in the economy's so-called recovery when 2.5m remain unemployed and 1.5m are stuck in part-time jobs because they can't find full-time work. So how do we get growth beyond the Square Mile?

Have you heard the good news? The economy is “turning a corner”. Growth is back. Green shoots abound. Hurrah! Forget that this is the slowest recovery in a century; forget that George Osborne promised us 7.7 per cent growth three years ago and yet we’ve had less than 3 per cent. Ignore the 2.5 million people who are still unemployed and the 1.5 million people who are stuck in part-time jobs because they can’t find full-time work. Turn a blind eye to the longest squeeze on workers’ incomes since the 1870s, to the 500,000 people who have been forced to visit food banks in the past year.

OK, you get my drift. To talk of a “recovery” is self-serving spin from the discredited austerians. If you want to see “green shoots”, you’ll have to head for the City of London. Bonuses there are up 64 per cent, while RBS and Lloyds are enjoying combined half-year profits of £3.5bn.

So how do we get growth beyond the Square Mile? Forget fiscal stimuli. Yes, Labour’s proposed VAT cut would boost demand – but by less than 1 per cent of GDP. Forget monetary stimuli. Interest rates have stood at a record low of 0.5 per cent since March 2009.

Then there is quantitative easing (QE), in which the Bank of England, according to the official explanation on its website, “electronically creates new money and uses it to purchase gilts from private investors such as pension funds and insurance companies . . . [This] lowers longer-term borrowing costs and encourages the issuance of new equities and bonds to stimulate spending.”

We have had a massive £375bn of QE so far, which may have saved the financial sector but has done very little for the rest of us. According to the Bank of England, 40 per cent of the gains from QE since 2009 have gone to the richest 5 per cent of households. “QE is a policy designed by the rich for the rich,” says Nigel Wilson, the chief executive of Legal & General.

There is, however, a way of using QE money in a bolder, much more daring way. It’s called “quantitative easing for the people”, or QEP.

QE of £375bn amounts to around £6,000 per man, woman and child in the UK. So why not electronically add this to the current accounts of every member of the public? Why not give the QE money directly to ordinary people to spend, save or pay off their debts? Wouldn’t it be better to inject new money into the real economy, rather than the City of London (where it usually sits unused, unspent, unlent, in bank vaults)?

QEP, incidentally, isn’t my idea. It’s Steve Keen’s. A professor of economics at the University of Western Sydney, Keen was one of only a handful of economists to have warned of the dangers of a financial crisis, several years before Lehman Brothers imploded in 2008.

QEP might elicit snorts of derision from the inflation hawks and deficit scolds, not to mention lazy references to hyperinflation and Weimar Germany, but it isn’t quack economics. Far from it. Remember the freemarket economist Milton Friedman, a hero to Thatcher and Pinochet, who said that downturns could be fought by “dropping money out of a helicopter”?

And remember his liberal-left rival John Maynard Keynes, who called for the Treasury to “fill old bottles with banknotes” and then bury them for people to find, dig up and spend?

QEP bypasses the tired and stale debate over austerity. Having the Bank of England hand over cash directly to consumers would boost aggregate demand without adding a penny to the national debt.

What’s not to like? Well, there’s no such thing as a free lunch, right? Wrong. There is if you’re a banker or a bond trader. The question is: why use QE money to bail out the masters of the universe rather than members of the public?

It’s a taboo topic, I guess. QEP is, in the words of the veteran economics commentator Anatole Kaletsky, formerly of the Times and now of Reuters, “too controversial for any policymaker to mention publicly”. Only a handful of pundits, such as Kaletsky and the Guardian’s Simon Jenkins, have so far dared to discuss the option of QEP. Kaletsky refers to “citizens’ dividends”, Jenkins to “people’s bonuses”.

It’s still a tough sell. Ever since Liam Byrne, the outgoing Labour chief secretary to the Treasury, left behind his now notorious note in May 2010 – “I’m afraid there is no money,” he joked – the austerians have pretended that the UK is broke, bust, bankrupt. In a speech in March, David Cameron declaimed that there’s “no magic money tree” to fund what he dismissively described as “ever more wishful borrowing and spending”.

This is the big lie of the debate over growth and deficits. Don’t take my word for it. Or Keen’s. A briefing document published by George Osborne’s Treasury to coincide with the Budget in March noted how: “It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. In theory, this could allow governments to increase spending or reduce taxation without raising corresponding financing from the private sector.”

The Treasury agrees: there is a money tree – and it isn’t magical. It’s called QE and it can, if we so choose, be deployed to support households, not banks; to encourage spending, not hoarding. QEP isn’t just doable: in an age of collapsing living standards, it’s vital.

It would also be revolutionary. To borrow a line often attributed to Henry Ford: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Mehdi Hasan is a contributing writer for the New Statesman and the political director of the Huffington Post UK, where this article is cross-posted

Economic growth can't only be focused on London's financial district. Image: Getty

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 23 October 2013 issue of the New Statesman, Russell Brand Guest Edit

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Who will win in Copeland? The Labour heartland hangs in the balance

The knife-edge by-election could end 82 years of Labour rule on the West Cumbrian coast.

Fine, relentless drizzle shrouds Whitehaven, a harbour town exposed on the outer edge of Copeland, West Cumbria. It is the most populous part of the coastal north-western constituency, which takes in everything from this old fishing port to Sellafield nuclear power station to England’s tallest mountain Scafell Pike. Sprawling and remote, it protrudes from the heart of the Lake District out into the Irish Sea.

Billy, a 72-year-old Whitehaven resident, is out for a morning walk along the marina with two friends, his woolly-hatted head held high against the whipping rain. He worked down the pit at the Haig Colliery for 27 years until it closed, and now works at Sellafield on contract, where he’s been since the age of 42.

“Whatever happens, a change has got to happen,” he says, hands stuffed into the pockets of his thick fleece. “If I do vote, the Bootle lass talks well for the Tories. They’re the favourites. If me mam heard me saying this now, she’d have battered us!” he laughs. “We were a big Labour family. But their vote has gone. Jeremy Corbyn – what is he?”

The Conservatives have their sights on traditional Labour voters like Billy, who have been returning Labour MPs for 82 years, to make the first government gain in a by-election since 1982.

Copeland has become increasingly marginal, held with just 2,564 votes by former frontbencher Jamie Reed, who resigned from Parliament last December to take a job at the nuclear plant. He triggered a by-election now regarded by all sides as too close to call. “I wouldn’t put a penny on it,” is how one local activist sums up the mood.

There are 10,000 people employed at the Sellafield site, and 21,000 jobs are promised for nearby Moorside – a project to build Europe’s largest nuclear power station now thrown into doubt, with Japanese company Toshiba likely to pull out.

Tories believe Jeremy Corbyn’s stance on nuclear power (he limply conceded it could be part of the “energy mix” recently, but his long prevarication betrayed his scepticism) and opposition to Trident, which is hosted in the neighbouring constituency of Barrow-in-Furness, could put off local employees who usually stick to Labour.

But it’s not that simple. The constituency may rely on nuclear for jobs, but I found a notable lack of affection for the industry. While most see the employment benefits, there is less enthusiasm for Sellafield being part of their home’s identity – particularly in Whitehaven, which houses the majority of employees in the constituency. Also, unions representing Sellafield workers have been in a dispute for months with ministers over pension cut plans.

“I worked at Sellafield for 30 years, and I’m against it,” growls Fred, Billy’s friend, a retiree of the same age who also used to work at the colliery. “Can you see nuclear power as safer than coal?” he asks, wild wiry eyebrows raised. “I’m a pit man; there was just nowhere else to work [when the colliery closed]. The pension scheme used to be second-to-none, now they’re trying to cut it, changing the terms.”

Derek Bone, a 51-year-old who has been a storeman at the plant for 15 years, is equally unconvinced. I meet him walking his dog along the seafront. “This county, Cumbria, Copeland, has always been a nuclear area – whether we like it or don’t,” he says, over the impatient barks of his Yorkshire terrier Milo. “But people say it’s only to do with Copeland. It ain’t. It employs a lot of people in the UK, outside the county – then they’re spending the money back where they’re from, not here.”

Such views might be just enough of a buffer against the damage caused by Corbyn’s nuclear reluctance. But the problem for Labour is that neither Fred nor Derek are particularly bothered about the result. While awareness of the by-election is high, many tell me that they won’t be voting this time. “Jeremy Corbyn says he’s against it [nuclear], now he’s not, and he could change his mind – I don’t believe any of them,” says Malcolm Campbell, a 55-year-old lorry driver who is part of the nuclear supply chain.

Also worrying for Labour is the deprivation in Copeland. Everyone I speak to complains about poor infrastructure, shoddy roads, derelict buildings, and lack of investment. This could punish the party that has been in power locally for so long.

The Tory candidate Trudy Harrison, who grew up in the coastal village of Seascale and now lives in Bootle, at the southern end of the constituency, claims local Labour rule has been ineffective. “We’re isolated, we’re remote, we’ve been forgotten and ignored by Labour for far too long,” she says.

I meet her in the town of Millom, at the southern tip of the constituency – the opposite end to Whitehaven. It centres on a small market square dominated by a smart 19th-century town hall with a mint-green domed clock tower. This is good Tory door-knocking territory; Millom has a Conservative-led town council.

While Harrison’s Labour opponents are relying on their legacy vote to turn out, Harrison is hoping that the same people think it’s time for a change, and can be combined with the existing Tory vote in places like Millom. “After 82 years of Labour rule, this is a huge ask,” she admits.

Another challenge for Harrison is the threat to services at Whitehaven’s West Cumberland Hospital. It has been proposed for a downgrade, which would mean those seeking urgent care – including children, stroke sufferers, and those in need of major trauma treatment and maternity care beyond midwifery – would have to travel the 40-mile journey to Carlisle on the notoriously bad A595 road.

Labour is blaming this on Conservative cuts to health spending, and indeed, Theresa May dodged calls to rescue the hospital in her campaign visit last week. “The Lady’s Not For Talking,” was one local paper front page. It also helps that Labour’s candidate, Gillian Troughton, is a St John Ambulance driver, who has driven the dangerous journey on a blue light.

“Seeing the health service having services taken away in the name of centralisation and saving money is just heart-breaking,” she tells me. “People are genuinely frightened . . . If we have a Tory MP, that essentially gives them the green light to say ‘this is OK’.”

But Harrison believes she would be best-placed to reverse the hospital downgrade. “[I] will have the ear of government,” she insists. “I stand the very best chance of making sure we save those essential services.”

Voters are concerned about the hospital, but divided on the idea that a Tory MP would have more power to save it.

“What the Conservatives are doing with the hospitals is disgusting,” a 44-year-old carer from Copeland’s second most-populated town of Egremont tells me. Her partner, Shaun Grant, who works as a labourer, agrees. “You have to travel to Carlisle – it could take one hour 40 minutes; the road is unpredictable.” They will both vote Labour.

Ken, a Conservative voter, counters: “People will lose their lives over it – we need someone in the circle, who can influence the government, to change it. I think the government would reward us for voting Tory.”

Fog engulfs the jagged coastline and rolling hills of Copeland as the sun begins to set on Sunday evening. But for most voters and campaigners here, the dense grey horizon is far clearer than what the result will be after going to the polls on Thursday.

Anoosh Chakelian is senior writer at the New Statesman.