13 Jul 2012

Quantitative unease

£375 billion! That’s the amount of money the Bank of England has printed and pumped into the economy through Quantitative Easing (QE) since March 2009. The idea has been to spark growth in the economy. But growth has gone the other way.

The idea was to help fuel a spate of infrastructure spending that would bring jobs and opportunity to an increasingly beleaguered population. Neither idea has worked.

Ever since 2008 the banks have been under pressure to re-capitalise so as to be better armed against another financial meltdown. At the same time the coalition government has talked of inaugurating a programme of infrastructure projects. This has not worked either. The biggest current infrastructure projects – London’s cross-rail and London’s Kings Cross have both been under way since long before the coalition came to power. Both are anyway in London where the true bite of the slow down is being least felt.

So where has all the money gone? For some time now banks have been under pressure to conform to the demands of the international Basel 3 agreement. These dictate a level of capital that banks must hold in order to trade. The banks have been coming into line with Basel. The implication is that the government has been busy shoring up the banks – busy shoring up the culture of the banks too. Because the diversion of the monies released by QE has resulted in the accidental recapitalization of the banks it actually means that you and I have been shoring up the banks, their bonuses, remuneration structures, terminological inexactitudes and the rest. The Bank of England could have done this openly and held the banks to structural reforms as they did so. But they did not, and we are where we are,

And where we are is, as we reported on Channel 4 News last night, with the M4 motorway falling down between Heathrow and Central London; stalled on any development of the ever more crowded rail system; and without any move on sorting airport needs for the next twenty years.

It is as if there is a quantitative disease in government; a quantitative collapse of leadership on visionary projects for the future. £375bn would have bought a very great deal of UK development. £375bn might well have bought a vast number of jobs, of manufacturing, of construction and even of private investment and – perish the thought, GROWTH. Instead it has been allowed to dribble away into a banking sector in urgent need of cultural reform before one penny more of tax payers’ money is spent on them.

Have we therefore entered a coalition twilight zone in which party political stalemate, bickering, name calling, and the rest make up for what we used to call action? Is that twilight itself looking increasing permanent? The political scientist John Curtice, of Strathclyde University has written of the increasing probability that Britain is destined to ‘enjoy’ coalition government of different stripes for years to come. His argument rests on the fact that minority parties – Greens, UKIP, BNP and the rest have secured some 15 per cent of the polls. This deprives the bigger parties of the numbers they need to win enough seats to rule alone.

When it first happened in our time, in 2010, many celebrated the end of ideological governments who could charge into war and much else, with just 40 per cent of the vote at a general election.

The layout of parliament – adversarial, divided from each other by a sword and a half’s length is, however, unforgiving. Old habits die hard and we have seen some of the worst parliamentary behaviour in years. We have seen too humiliating failures of infrastructure in what so many yearn to be our finest peacetime hour.

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