2021-07-22
We do not as a rule involve ourselves in matters mundane but the House of Lords Economic Affairs Committee in their recent report highlights the dangers inherent in the relationship between the Bank of England (which prints the money) and the Treasury (which spends it).
Now this print-to-spend arrangement is not supposed to exist, but their Lordships found that it is "widely perceived" that the amount printed seems to be tracking the amount spent.
"The Bank of England has become addicted to quantitative easing. It appears to be its answer to all the country’s economic problems and by the end of 2021, the Bank will own an eye-watering £875bn of Government bonds and £20bn in corporate bonds"
"The Bank does not publish sufficient information on QE for the public and Parliament to hold it to account for its decisions"
"The Chancellor refused the Committee’s requests for him to publish the contractual document (the 'Deed of Indemnity') between HM Treasury and the Bank of England which sets out the taxpayer liability to cover any financial losses suffered by the Bank as a result of QE. It remains hidden from public scrutiny. The Committee calls again for its immediate publication"
What a surprise - the taxpayer will be responsible for meeting any shortfall in the Bank's finances but no real scrutiny of the Bank's QE activities (let alone policies) seems to be possible?
This short summary of their Lordships' findings is worth reading, if only to confirm suspicions that our parliamentary system of holding government to account seems not to be working.
For further information, read the full report.
