Call for credit to be channelled into long term investment

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A SHEFFIELD University professor is calling on the Government to turn the ailing British economy around by cutting back on the provision of credit for housing and consumption.

Colin Hay, Professor of Political Analysis and Co-Director of the University’s Sheffield Political Economic Research Institute, wants credit to be channelled into long term investment in new technologies, education and infrastructure.

And he is calling for banks to be shamed into reducing the “exorbitant interest rates” they are charging consumers, home-owners and commercial borrowers, which he says are now typically 10 times the base rate.

The calls come in the first of what will be a series of policy papers produced by the Institute. Prof Hay claims in the paper, The British Growth Crisis: a Crisis of and for Growth, published today, that the British economy is “an excessively liberalised Anglo-American form of capitalism.”

“This is a form of capitalism and a growth model that was inherently unstable and threatened the entire world economy – its excesses cannot be tolerated again,” says Prof Hay.

“In basic terms we are calling for channelling the supply of credit from housing and consumption into longer term growth-generating strategic investment in new technologies, education and infrastructure.”

Prof Hay says British policy-makers should reconsider the relationship between investment banking and commercial banking, which he believes allows commercial banking to subsidise investment banking and impairs the capacity to build a new growth model.

“My hope is that I have made a compelling case that we need first to get right what went wrong in order to put it right and to suggest at least some of what getting it right and putting it right might entail.”