Money in people’s pockets is the key to economic recovery

Letter: David Redshaw responds to a letter on the bond markets and economic pressures afflicting the UK

Neil Kinnock’s timely letter (9 September) reminds us that we are not alone in suffering high gilt yields and borrowing costs. We are still feeling the fallout from Covid, and it needs mentioning that our national debt is similar to America’s and much less than Japan’s, and it never gets mentioned that Italy routinely runs 100% of GDP debt. But as Kinnock observes, the policies of several Conservative governments (including Brexit) have made things worse, and the problem for us is not so much the actual debt but our direction of travel. The aforementioned will make the bond markets view us with a more jaundiced eye.

It was predictable that Jamie Dimon would pop up at this point (JP Morgan boss meets Burnham and Healey to warn against bank tax rise, 10 September). He talks about potential lack of investment by the banks. What investment? We aren’t even a nation of shopkeepers any longer; we’re a nation of pizza deliverers.

The economist JK Galbraith comes to mind here. He said that when push comes to shove, it’s the regular spendings of the working masses that keep the high street going. The spendings of the mega-rich involve either luxury goods or investment in plant, both of which are erratic and subject to the ups and downs of the economic cycle. Some might say, after the events of 1990 and 2008, that the banks have more money than is good for them.

Money in people’s pockets and the confidence to spend it has always been the recipe for recovery. Might we start by housing policies to reduce the 40% of rent that many are paying out of their salary? And a bedroom tax for the rich to make better use of the existing housing stock? You can go on raising the minimum wage, but you’re simply chasing your tail.