Cash handouts better alternative to boost British economy, suggest experts

A group of British and international economists suggested that direct cash handouts would be a better alternative to boost Britain’s flagging economy as compared to interest-rate cuts.

In a letter published in The Guardian, the 35 economists urged new UK chancellor of exchequer Philip Hammond to let the Bank of England try more radical options.

Some of the suggestions published in the letter also include allowing the bank to create money to fund key infrastructure projects, pay for tax cuts or direct pays to households.

“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,” the letter said.

The Guardian also reported that Prime Minister Theresa May is in favour of higher spending on investment and Hammond said he would “reset” tax and spending policy if it was deemed necessary.

“As the new chancellor looks to ‘reset’ economic policy, new ways of conducting monetary policy should be considered.

“Instead of policies designed to fuel asset price bubbles and increase household debt, the Treasury and the Bank of England should cooperate to directly stimulate aggregate demand in the real economy,” the letter continued.

In Malaysia, Prime Minister Datuk Seri Najib Tun Razak introduced the 1Malaysia Peole's Aid (BR1M) in 2012 to assist the low income earners in Malaysia.

Some the requirement to qualify for BR1M include the household income of recipient must be lower than RM4000.