How will the new money be spent?

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When the Bank of England authorises the creation of a certain amount of new money, it will be added to the government’s account at the Bank of England. The government is then free to use this money however it chooses in order to achieve its democratically-mandated policy objectives. Therefore the government may choose to:

  1. increase government spending
  2. reduce the overall tax burden
  3. make direct payments to citizens (sometimes referred to as a ‘citizen’s dividend’)
  4. pay down the national debt

The exact mix of the above will depend on the priorities of the government of the day. Since the newly created money will simply be added to tax revenue, there is no need for a special process to decide how to spend it.

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