We all know that our economy isn’t working for most people, but too often, we feel powerless to fix it. A big reason is that the government and the Bank of England have a dysfunctional relationship that stops either institution from taking responsibility.
They have the power to rebalance our economy away from property and financial markets and to boost jobs, wages, infrastructure and green technology. But this won’t be possible without reforming the way these institutions work together.
Over the past few years, the Bank has tried several different ways of boosting demand. But none of them have been effective at getting money into the real economy, or at boosting jobs and wages. That’s because it’s powerless to do so without the Treasury’s cooperation.
To bring about a sustainable economic recovery, we need to invest in new technology and build our infrastructure. The Bank could create money for the Treasury to spend on these things. But there’s a misguided idea that the Bank and the Treasury should work in total isolation from one another, which prevents these kinds of policies from being used.
Instead of working with the Bank to boost demand, the Treasury’s policies have been undermining it. Austerity has sucked demand out of the economy, and forced the Bank to adopt even more unconventional policies.
Too often, the Bank has ended up making decisions which we wouldn’t tolerate from elected politicians. Its policies have boosted the richest households by hundreds of thousands of pounds, and the Bank has been effectively subsidising foreign-owned corporations.
We believe that when the Bank creates new money, it should be up to the Treasury to decide how it’s spent, and should defend its decisions before Parliament.
