Spending Review…no new ideas then

It seems like the Spending Review that was announced yesterday by George Osborne has been widely criticized. It looks like playing the same game of cutting spending isn’t fooling anybody about the prospects of getting the economy moving again.

The Institute for Fiscal Studies called the review ‘woeful‘. The director, Paul Johnson stated:

“Publishing such a small amount of information with so little explanation is not an exercise in open government.”

The CBI’s Director-General, John Cridland said:

“Infrastructure is rightly singled out as the most effective engine for growth, as we urged. While the Government talks a good game on infrastructure we’ve seen too little delivery on the ground so far.”

There was an announcement of a much needed £100 billion to go directly into infrastructure. But where this £100 billion is coming from, is still unclear. In part from the sell-off of the public assets including the student loan book. Furthermore, it seems that the £50 billion outlined for 2015-6 represents a real-terms fall of 1.7% from the infrastructure budget for 2014-15.

To get jobs created in the real (non-financial) economy on the scale and time-frame needed, Positive Money is proposing that a ‘new round’ of Quantitative Easing is created by the Bank of England and spent on creating jobs to build affordable housing, retrofitting homes to make them more energy efficient, and getting more funding into renewable energy projects. We know what we need, we just need some new economic thinking about how to do it!

You can read our submission to the Treasury Select Committee (in January) on why QE has not worked so far and how we should do it differently here.