Money

Blimey, it's not easy being Chancellor, is it. No-one likes you, endless difficult decisions and everyone thinks they could do the job better. A bit like managing the England team but without a salary twenty-two times higher.

Having said that, I'm still not entirely convinced that George Osborne's got it right. The thing is that he seems to have misunderstood the nature of the problem he is trying to solve. Conventional wisdom is that "there's not enough money". But that's not right. Thanks to Sir Mervyn King's printing press, there's more money than there's ever been in history. The problem is that it's not moving about fast enough.

You see, "the economy" is simply a word we use to describe economic activity. The key word here is activity. If a pound is printed by the Bank, and promptly sits in the vaults of Barclays for a year then that pound has been worth a pound. However, if it is spent by an old lady on a bus fare which is used to pay a bus driver who uses it to buy some chips from a chippie who repaints her shop with paint from Homebase who pay it in corporation tax to the Chancellor who uses it to pay a teacher who uses it to pay his mortgage, then that pound has been worth seven pounds by the end of the year. Each time that pound changes hands, the great GDP-omiter clunks up another quid. The Chancellor's task, therefore, is to work out how to make Mervyn's millions move faster.

OK, so how do we do that? Well, if you want money to move faster, you need to get it into the hands of people who will spend it. A pound in a pocket is of no value to the economy: a pound in a palm is. By far the people most likely to spend all the money they're given are the poor. It's obvious when you think about it. Money given to the poor is valuable to the economy, money given to the rich stagnates; especially in a recession when confidence is low and everyone who can will hoard cash for a rainy day.

This is why "we're all in it together" isn't just about fairness, it's about economic necessity.

So how did George do? Well, despite the pain there were a few tax cuts in today's autumn statement. Increases to the personal allowance, tweaks to inheritance tax and a headline cut in corporation tax make sense. Companies now exist in a global marketplace, and it makes sense to attract firms to Britain. The reason Starbucks pay no tax in Britain is because they'd pay less by pretending their coffee shops are in Switzerland. Cut their taxes, and they might actually pay them.

There was also a cut in planned fuel duty. This seems a shame. 50% of the poorest fifth do not even own a car. The one tax cut we've got and 50% of the poor won't get a penny from it. Conversely, the continued squeeze on both benefits and tax credits will significantly reduce their real incomes. Taking money from the only group certain to spend it might not be the best idea for growing the economy.

So what is to be done? Well, perhaps instead of taking money from the people most likely to spend it, we should give them more. By all means make the structural changes to welfare that need to be made (and some do). But provide transitional support to get the poorest through the change. Good idea, but where will the money come from? Why, from Sir Mervyn, of course. 

Britain’s Quantitative Easing of £375 billion is worth £6,000 per head or £24,000 per family. Directed at the two-thirds of households with incomes below average (yes, most of us!) and that works out as a transitional payment of roughly £15,000 per household. Assume it's paid over three years, and that's an extra £5k per year to adjust to the pain of reduced public services.

That way, the Government gets to stick to its austerity plans while the poor kick start spending in the economy. Let's call it "trickle up". Unlike trickle down (the economic creed beloved of Thatcherites) it might even work.