Will Government consider new tools for the Bank of England?

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The first proposal has been made by Mark Blyth, Eastman Professor of Political Economy at Brown University; Eric Lonergan, Fund manager, M&G Investments; and Simon Wren-­Lewis, Professor of Economic Policy at the Blavaynik School of Government, Oxford University.

Stimulating demand – QE for the people

They note that government policy is based upon a belief that now the crisis is over, the private sector will flourish and interest rates gradually normalise. But rather than relying on policy-­making based on hope, the writers propose that the government legislates to enable the Bank of England to make payments directly to the household sector – quantitative easing [QE] for the people. They refer to evidence that transfers to the household sector have a great impact on demand; consumers appear to spend between a third and a half of any cash windfalls.

Funding job creation

Positive Money adds to this, “When new money is created, it should be used to fund vital public services or provide finance to businesses, creating jobs where they’re needed, instead of being used to push up house prices or speculate on the financial markets . . .”. This proposal would enable the increased household demand to be met by domestic suppliers, reducing the trade deficit.

And transforming Britain’s buildings and energy supply

The Green New Deal Group advocates that a programme of ‘green quantitative easing,’ rather than propping up failing banks, could help to reduce the public debt and kick-start the transformation of the UK’s energy supply and housing stock, creating thousands of new green-collar jobs.

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Will government expand the Bank’s mission: “Promoting the good of the people of the United Kingdom by maintaining monetary and financial stability” by adding purposeful work for all, including the building of an environmentally sustainable housing and energy supply?

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