Kick-starting the Economy
by Martyn Hart, Chairman NOA
Friday, October 14, 2011
Unemployment stands at 2.57 million, and it would seem that the government has no clear plan on how to get people back to work. An austerity plan is one thing, but getting folk back to work is vital. Employment wise, we’re heading in the wrong direction and have been for some time. It’s time for the government to take positive decisive action. That means generating growth, and if that means ringing the changes and thinking a bit more radically, then why not?
If the government can inject £ 75 billion into the economy with quantitative easing, which, in effect, is the artificial boosting of banks’ own bank balances, and trusting them to spread this ‘new money’ around the economy. Doesn’t quite work like that though does it?
Last time out, quantitative easing didn’t have a great deal of impact, because the banks took the ‘cash’ and simply sat on it. The money went straight to banks’ bottom lines, with small businesses experiencing all the same problems getting loans out of banks that they did prior to QE and this time the added risk that savers face a smaller pension income. Doesn’t seem such good idea does it?
Private sector job creation is failing to keep with public sector job losses and that needs to change. Cutting out public sector efficiencies is the way to but if people end up on the dole as a result, that could be a false economy long term. The government owes it to the people of this country to carve out opportunities for jobless people to get back on their feet.
QE’s cash might work better by bypassing the bankers, and infusing the money into the system more directly. QE is artificially cranking up bank balances – why not whack a zero onto deserving enterprises’ bank accounts instead? And by deserving, I mean those with a clear plan and commitment to generating jobs, perhaps bringing some outsourcing back to the UK? Government subsidised expansion plans, particularly for SMEs bidding for government business, could help give the economy the kick-start it so desperately needs.