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But more QE isn’t what is required. In fact if we take the QE solution to its nth degree, why not go the whole hog and just buy up 100 percent of the gilt market ? The government’s spending troubles would be over. Zimbabwe, Argentina, Weimar Republic — you had it right all along.
Forgive the slightly facetious comment, but QE simply isn’t the answer here. Youth unemployment is running at over 20 percent and long-term unemployed at over 1 million. In a post-recessionaryenvironment, corporates pay down debt and strengthen balance sheets, but this merely adds to the downward spiral as economic output stops rising, while financing is harder to come in the general risk-averse climate that prevails.
Plan A with benefits would see the government looking more to the supply side and the labor market, and incentivizing small and medium-sized enterprises (SMEs) to create more jobs. This doesn’t necessarily have to cost the exchequer anything, for instance the first step could be to place a freeze on payroll taxes for all new hires for the next (say) 12 months.
Employer national insurance contributions are a material factor in staff hiring plans, so such a move would yield instant results. The lack of labor market measures in this year’s budget was extremely disappointing to observe.
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