David Prosser: Is it time for the Bank to show us all the money?


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The Independent Online

Outlook: It was fascinating to hear Sushil Wadhwani, the eminent economist who these days runs a fund management company, say the Bank of England was not being sufficiently imaginative with its £75bn quantitative easing scheme.

He pointed out that for just £15bn, the Bank could hand every adult in the country a £300 voucher to spend as they see fit, which would be a much more direct boost to demand.

The idea is not as crazy as it sounds – the Japanese tried something very similar in 1998. The worry would be that the money would be saved and not spent – you could make people spend their vouchers, but you couldn't prevent them just buying stuff they would otherwise have bought with cash – which would undermine the idea. Still, there would surely be at least some boost to consumer spending.

There is, in any case, scepticism about the effectiveness of quantitative easing itself. It's a policy aimed at driving down the cost of credit, improving its availability. But many believe the problem is a lack of demand for credit from cautious households and businesses, rather than a lack of supply.

The Japanese experience is worth studying – there may be ways to ensure as much as possible of any hand-out goes towards boosting demand rather than savings balances. It's a desperate measure, no doubt, but these are desperate times – just ask Asos, the online retail sensation of the past few years, which yesterday said it was seeing almost no growth at all in the UK.