UK citizens could have received £6,834 each

In response to potential economic uncertainties arising from the recent Brexit vote, the Bank of England announced it would be expanding its Quantitative Easing (QE) programme. Over the next 6 months it will be pumping an extra £70bn of new money into financial markets – bringing QE to a total £445bn.

But from 2009 to 2012, the Bank of England created £375bn of new money, which went directly into financial markets and most of it didn’t filter down into the productive sectors of the economy – the sectors that create new flows of goods and services over time.

Instead of directing new investment into infrastructure, businesses and jobs – the bulk of this money remained trapped in the financial sector or flowed into property. This merely inflated asset and property prices, and enriched the owners of these assets – with very little impact on productivity or output.

In fact, even the Bank of England’s own research has shown it exacerbated inequality.

The richest 5% of UK households became £128,000 wealthier, whilst most households wealth increased a little, or not at all.

The Bank’s research further suggests that, at the very best, the £375bn had a very modest impact on the economy, increasing GDP by 1.5-2%. In other words, every £1 of QE added just 8p to the economy. This translated into increasing incomes by a total of £500-800 per person in the UK.

At Positive Money we believe there is a much better way of using the money created through QE. We would have a QE for People programme!

The mechanics are not quite the same but it could be used to finance much needed investment in green infrastructure, hospitals and schools (to learn more about the differences between QE and QE for People click here).

As an example, if just £10bn were created and spent on the construction of affordable housing, it could boost GDP by up to £28bn. This means that for every £1 GDP would increase by £2.80. In addition, we would have more houses and it could create up to 284,000 jobs.

Or newly created money could simply be distributed evenly amongst the population via a citizen’s dividend.

For illustrative purposes, if the £445bn of new money created via QE was simply distributed evenly amongst the population every UK citizen would receive a boost to their income of £570 per month for 12 months.

In total, every child, woman, and man would receive £6,834. Of course, because a citizen’s dividend would be much more effective than QE only a small fraction would actually be necessary stimulate economic activity.

There’s a growing movement of ordinary people, economists and politicians calling for a better alternative – for this money to be spent in a way that benefits all of us.

Sign the petition calling on the Chancellor to give the Bank of England the means to target the money at people, not financial markets.