The case for a new kind of quantitative easing

Policy-makers are clinging to a rigid determination to do everything at arms-length. Even when it do

Vince Cable famously described his critics as the "ideological descendents of the people who sent children up chimneys". But the real problem is not the influence of those who voted against the Ten Hours Bill. It is that economic policy remains in the hands of those with a snobbish horror of trade.

Perhaps it is a horror of government intervention. Perhaps it is a horror of broken finger nails. But, whatever it is, policy-makers cling to a rigid determination to do everything at arms-length. Even when it doesn't work.

Instead of effective local economic regeneration, based on using local money flows more efficiently, we have plans to raise the motorway speed limit to 80 mph. Instead of reforming local government systems to bring to bear people's face-to-face skills and pride in the job, we get shared back office services and call centres.

But worst of all, instead of ambitious projects to direct new money where it is needed, we have quantitative easing -- a hands-off, labyrinthine scheme for buying government bonds from banks, which they then use for bonuses. All the evidence from Japan over the past generation is that this form of quantitative easing doesn't work. It seems unable to kickstart the zombie banks into life.

But perhaps that is hardly surprising, because it is so indirect. Why have we lost our faith in our own ability to roll up our sleeves and make things happen?

The news that the government will launch "credit easing", a project to invest government money in small business bonds to help them expand, is a sign that the coalition has begun to feel the same way. It is a sign that ministers realise not just that Project Merlin has failed, but that if you want something done, you will be as old as Methuselah (as Ebenezer Howard used to say) if you expect the money to trickle down magically into the right sectors.

You have to use money more precisely, not just from the centre but locally too. We have to find the enterprising people and the green business projects, help them with their plans, find them the start-up finance, provide them with mentors. There is no point waiting politely for the trickle down that never trickles.

So here is the real test. When we get a new round of quantitative easing, as we almost certainly will, can we persuade the Bank of England to abandon the gentlemanly -- and, let's face it, downright wasteful -- hands-off method?

If they are going to create the money we need, interest-free, then for goodness sake, they must direct it to where it matters. We don't have the time for trickling. They must:

  • Put it directly into the new institution, buying small business bonds.
  • Buy bonds in the new Green Investment Bank, so that the money goes directly into loans that build the green economy (green quantitative easing).
  • If necessary, create the money to pay off the euro debt that threatens the world.

No more polite distaste for the mucky business of making things happen. It is time to act and to innovate. Because, at the end of the day, economics was made to serve humanity, not humanity to serve economics.

David Boyle is a fellow of the New Economics Foundation and the author of The Human Element (Earthscan).

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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