The FT reports this morning that:
Philip Hammond will admit to the largest deterioration in British public finances since 2011 in next week's Autumn Statement when the official forecast will show the UK faces a £100bn bill for Brexit within five years.
George Osborne will be smiling on the back benches. And it could argued that the Treasury 'would say that, wouldn't they?' given their pre-Brexit forecasts. The counter argument is obvious: just about every economist (including me, for what it's worth) would agree that losses of this magnitude (or more, given we now have Trump to contend with as well) are likely.
The days of balanced budgets are, as a result, even more remote than ever, not that we need worry unduly about that. What is more worrying is this FT comment:
There will not be much room in the public finances to reset fiscal policy with a big stimulus package.
This is simply untrue. We are doing £60 billion of QE this year. It's the wrong sort of QE. If People's or Green QE was done instead all the funding required would be available, and there is substantial evidence that this pays for itself if invested into infrastructure by so boosting economic activity that tax can be recovered from the additional output generated to very rapidly cover the borrowing. It is dogma alone in that case that will prevent the investment in infrastructure this country so desperately needs.
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Question to all MP’s:
– Why is QE ok when given to banks, but not OK when strategically invested in infrastructure priorities?
The problem with your question is…….I doubt that many MPs would even understand what QE does (or is intended to do).Indeed, most of them probably don’t even know where money comes from & have probably not even read the BoE “report” on the subject (maybe I’m being unduly pessimistic?). This applies as much to the Tories as it does to labour etc.
You don’t seem to realise that QE doesn’t give money to the banks at all. It involves buying government bond assets from multiple sources – insurance companies, pension funds, asset managers and banks. Simply exchanging cash for assets.
Indeed, over the period, banks were net purchasers of government bonds, not net sellers.
And who do you think benefitted from the enhanced liquidity created which the banks themselves would not make?
Like it Richard, I have posted your article on our Positive Money group page.
Richard, it’s a matter of days before Philip Hammond stands to present his autumn statement and its likely we will get the usual mismash of half-hearted stimulants and mis-directed cut-backs.
Is it too late for you and your like minded colleagues, who speak with gravitas on the economy and tax, to publish an open letter in the daily press -Guardian or FT? If there are costs I would willing chip in…
And then there is my MP. Could you publish an easy-to-read round-robin covering the use of Peoples QE to fund infrastructure projects, something that even my Tory grandee will be able to grasp, so that when MPs discuss fiscal matters in future, the Finance Bill 2017 for example, they will have a different point of view – maybe.
any chance of some views on the NHS?
Re?
This could all be funded interest free……and produce real lasting wealth.
The magic money tree?