A fiscal stimulus financed by central bank money creation could be used to fund essential investment in infrastructure projects – boosting the incomes of businesses and households, and increasing the public sector’s productive assets in the process. Alternatively, the money could be used to fund either a tax cut or direct cash transfers to households, resulting in an immediate increase of household disposable incomes.
There is a way to get cash usefully to certain people, a little less randomly than the image of the helicopter dropping money suggests. The benefits system has three main routes that might be used to distribute one off payments:
- The Christmas bonus (forget the name, it’s usually paid in early December anyway) goes to recipients of 18 benefits, including pensions, disability benefits and ESA.
- Cold Weather payments are special payments made to claimants of pension credit, ESA, JSA. The cold weather is irrelevant here – the DWP computers aren’t regulated by a thermometer: what matters is the capacity to make one off payments.
- The Winter Fuel Payment (again, forget the name – it’s not about fuel, or cold weather) mainly goes to those above pension age – there are exceptions but those are defeasible.
There may also be scope to supplement Child Benefit with one-off payments, though that is less clear.
Any of these would be much more beneficial than a tax cut. The problem with tax cuts, apart from the work they create, is that they go to better off people. People on lower incomes tend to spend more proportionately on essentials (food, energy and housing), so at least the first use of the money will be in the domestic economy. It may also do a little for poverty, and that is no bad thing.