Funding Economic Growth

The state of the UK economy is such, and has been such for years, that growth is not going to happen on any meaningful scale without a significant boost. The complete failure of both the Tory led coalition and the Tory government, to hit any of their financial targets and to achieve their promised re-balancing of the economy underscores this. The GDP is too small for the growing population and has to expand significantly to create a wide enough tax base to deliver the required income to pay for all the public services properly.

Tax increases on the better off and corporations will certainly produce revenue in the short term, as will borrowing to invest. Investing in public housing, infrastructure, energy, broadband and so on are critical to economic growth and it is the refusal of the present model to borrow for investment that is the reason for the failure to grow the economy at a decent level thus far. Austerity lasting longer than eighteen months is a trap which inhibits growth and sucks resources from the bottom to the top, enabling the rich to grow richer at the expense of the poor.

But borrowing alone will not be enough. The financial sector, including both the post crash and post Brexit injections, has enjoyed £435 billion of printed money known as quantitative easing. If Labour wins power, either alone or in coalition with other anti austerity soft Brexit parties, it will have to pump the same amount into the base of the economy to re-boot it. This needs to be direct or via a national investment bank and must be in the form of investment rather than loans. I call it dynamic quantitative easing.