Simon English: If Sir Mervyn is now printing even more money, how about using it differently?

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Outlook Sir Mervyn King wanders into the computer room at the Bank of England. He stoops to the printer, checking that it is full (very full) of paper. Then he types Control P and hits Return. Another £50bn chugs out of the Bank and into the streets. Hey presto, economy saved.

Quantitative easing (QE) doesn't really work like that, of course. No money is actually printed, merely credited to the accounts of big banks and pension funds in the hope that their balance sheets will loosen, that enterprise will flow.

But maybe it should. We are now £325bn into the QE experiment and evidence that it is working is somewhat thin on the ground.

Defenders of the policy mostly have to rely on the argument that you can't tell how bad things would now be had Sir Merv, pictured, and co not been so willing to act.

Obviously that's true, but it's uncomfortably close to the reasoning bankers like to use to defend their pay: if you hadn't given me this absurd amount of money, something very bad might well have happened. Uh-huh.

The Bank can point to lower gilt yields and higher prices of other assets as successes of QE, but do those represent value for money?

Here's the Bank's own chief economist, Spencer Dale, discussing the merits of the scheme back in 2009: "A critical issue will be the extent to which movements in asset prices and market spreads are translated into lower borrowing rates faced by businesses and households. Equally important will be the extent to which the additional liquidity and lower borrowing rates act to spur the growth of broad money and credit."

The Bank doesn't seem to be pushing this line much lately.

No wonder. Its own figures show that small and medium-sized companies are finding it more expensive to borrow now than they were when the first dose of QE emerged in March 2009.

So how about the latest injection is used in a different manner, if only as an experiment.

Ros Altmann of Saga suggests five alternative approaches:

1. Create new money and drop pounds notes from a helicopter, so people can spend them

2. Use newly created money to underwrite small business loans and also spread some of the risk that lenders take

3. Use newly created money to lend directly to small businesses who are starved of credit and want to expand

4. Set up a new lending institution to lend to growing companies

5. Use newly created money to fund infrastructure projects alongside pension funds

These things might not work either, and chucking money out of a helicopter might make international observers, erm, nervous about the state of play in Britain. But it would surely be easier to see where the money was going this way, rather than just allowing it to be swallowed by the financial system on the hope it will later filter to the rest of us.

s.english@independent.co.uk

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