In the heart of government, there are some universal golden rules. One of them is that no decision is truly black and white. Everyone has their own opinion and most people will broadly agree on what is the morally right thing to do, but when is comes to making or implementing government policy there is always a side effect or unintended consequence. It could be a well known problem such as giving welfare support to out of work people which unfortunately discourages them from going back to work (called the Welfare Trap by economists) or it could be something more complicated such as offering more lenient sentences to suspected rapists in an attempt to improve conviction rates and spare rape victims the horrifying ordeal of testifying in court. Ian Duncan Smith, the Secretary of State for Work and Pensions, is making a big deal of trying to tackle the welfare trap and Kenneth Clarke, the Justice Secretary, had to pedal back from his clumsy efforts to gain support for his more lenient sentences idea. Wherever you stand on these issues and whatever opinion people may have, fixing these problems is not black and white - you don’t want unemployed people unable to even feed themselves and their children because they can’t find work and the justice system desperately needs to improve the conviction rates for rape cases, but how do you do it? And then there is the issue of trying to fix the economy…
Significant political bickering is underway in the UK, Europe, the USA and elsewhere about whether it should be austerity or growth, more or less taxes, more or less government spending and so on. So many people claim to know the answer, yet I can’t help but feel that if any of them are proved right by history it will be by accident rather than by truly understanding how to fix the problem. Everyone can see there is a problem, but no one can make a fully logical argument about what will actually work, there are just too many economic variables to take into account. Getting the UK economy (or other troubled economies) to grow again is not a black and white issue no matter what any politician or economist says. What is clear is that the UK population is not confident that the government (or the opposition benches) knows what to do. The French have certainly already demonstrated this lack of confidence by voting out Sarkozy and this pattern is a familiar one across Europe . Conservative and Lib Dem MPs and Ministers are not in a happy place right now, they know that in 2015 they will face electoral wipe out if they have not ‘fixed it’. On the face of it, Labour needs to do nothing more than avoid looking stupid to be able to win that election.
So what would a Machiavellian sort of advisor whisper into the ear of George Osborne, David Cameron or Nick Clegg? What secret trick could there be lurking within the secret file named, “Break glass to kick start the UK economy and win the election”?
I am thinking of an economic concept called ‘Helicopter Money or the Helicopter Drop’. It is a very simple concept. The UK Government and/or the Bank of England simply gives money away to UK citizens and tells them to spend it. They can do this by reducing taxation or by printing more money and giving it away as a lump sum. This may sound familiar and that is because it is, it is called Quantative Easing. But of course, all that money is going to the banks and they are not in the mood for sharing it right now which is part of the problem. So would giving UK citizens the money instead work better?
Looking at the 2011 census results, there are approximately 65 million people in the UK . Not all pay tax, not all work, not all are here legally and not all can vote. To keep things simple, I would favour paying a lump sum to everyone who can vote. Yes children and teenagers do miss out, as do prisoners and immigrants, but this is the easiest way I can think of tracking everyone down to give them the money and thus giving it to people who should be spending it. By law, you have to register to vote (knowing that this sort of gift was coming would make people eager to comply with that law!) and as everyone can only have one vote, thus they should only receive one cheque via this method. Yes there is room for error and yes it can be abused, but these issues would have to be tolerated in the name of the national good. Now back to our 65 million figure. A back of the fag packet calculation (using this source) says around 15 million will be missing out from being too young or not eligible to vote. So that means 50 million people to send cheques to. Let’s say we give them £1000 each and so easy maths says that this is £50 billion ( UK not US billions) of Quantative Easing going direct to UK citizens. Now this is a lot of money, but it is a hell of a lot less than what the Bank of England has already committed to for the banks, £325 billion according to the BBC. Ok so there might be a higher admin cost, but this would again be money spent in the UK employing people to distribute this money, itself not a bad thing and would hardly be billions in itself by using the existing electoral roll.
So the rules for the Helicopter Drop would be simple. If I was the Government, I would say, “Here is £1000, spend it however you want. All we ask is that you spend it in a way that helps the UK economy, your choice on how you do it.” So no buying TVs, Ipads or anything else made in China please! On the other hand, this is not that bad as long as UK consumers use UK retail outlets to buy those products. Guidance could be produced to show that fixing or extending your house, donating to charity, going on a UK holiday, having a gluttonous party or even putting it into a savings account in your bank (thus improving their capital which is what QE is all about) would all help. Sure, rich people who don’t need the money would also benefit and no doubt some people will hide it under the mattress or spend it abroad. But this does not matter, the point is that this is money people are being gifted and we all like to spend our gifts don’t we? The rich may even spend £2000 rather than just £1000. It is all about telling people that it is up to them and giving them the feel good factor to get into the spirit of things.
So the question that needs to be asked, will this actually work? Who knows. I don’t think it could be any worse than the current methods. In fact, I think it can only benefit the UK economy because it gets money flowing again which is what is desperately needed. More money going through the system means companies are more confident and employ more people, where that money goes is not so important, just as long as it goes somewhere in the UK. More importantly for the politicians, it sends a warm message that the Government is going to trust the people to help fix the economy and if it works, the Government gets the credit for being creative and generous. The only remaining question would be when to do it. Not too close to the election as that would look like outright bribery and you need time for it to look like it worked and kick started the economy when it desperately needed it. So, a gift for the Queen’s Jubilee? Next year perhaps? I await with bated breath…
Machiavelli would probably approve, but then he knew his Roman history where the emperors did something similar on a regular basis. Buy the mob, it worked then can it work now? This trick was also done by President Roosevelt during the Great Depression of the 1920s. This cartoon was a pessimistic view of that approach. It didn't work out too bad for the Americans in the end did it...
No comments:
Post a Comment