Bank of England sold debt without ‘any regard to value for money’ | Politics | News

- Advertisement -

Bank of England sold debt without ‘any regard to value for money’ | Politics | News

The Bank of England took a « leap in the dark » when it started selling off Government debt in 2022.

An influential group of MPs heard how the Bank is said to have started selling the debt without paying attention to whether the taxpayer was getting good value for money.

The Treasury Select Committee said it was important for the Bank’s key decision makers to focus on setting borrowing costs. But it said officials should start exploring how to ensure the pace of so-called quantative tightening (QT) is at least, in part, based on value-fo-money.

The Bank told the PA news agency that it would consider the Committee’s findings before responding.

The group of MPs said the Bank was the first major central bank in the world to embark on the tightening process, which essentially means selling off the Government debt that it has in order to remove money from the economy.

The debt it has sold off is the debt that it started buying in the 2008 financial crisis when the Bank wanted to add new money to a struggling economy.

The Bank then sits on the money that it has received from these sales, which in theory should help reduce inflation because there is less cash to be spent on goods and services.

It is one of the tools in the Bank’s arsenal, although its main way of getting inflation under control is to increase interest rates, which it has also been doing over the last two years.

In its report, the Treasury Committee said that the Bank had not been able to “fully consider the broader economic consequences” of its quantitative tightening (QT).

It said that economists were divided over the risks of tightening and how fast it should be carried out.

“While recognising that QT is not considered an active monetary policy tool by the Bank, the Committee determines that decisions are being taken regarding vast amounts of taxpayers’ money without any regard to value for money,” the group said.

Treasury committee chair Harriett Baldwin said: “It has become clear during the course of this inquiry that the decision to undertake a period of quantitative tightening is a leap in the dark for the UK economy.

“I recognise that the Bank of England does not have a crystal ball and is in uncharted waters, but more can be done to develop forecasting and modelling tools which can help us understand the risks and benefits of QT.

“With more public money at stake than was ever envisaged when QE (quantitative easing) was launched, the Bank and Treasury should take our advice and explore whether the usual value for money considerations can be factored in when deciding the pace and level of QT they implement.”

The Bank of England said: “We welcome the Committee’s report and will consider its findings carefully before responding. We continue to encourage active debate about our monetary policy decisions and their implementation.”

Cet article est apparu en premier sur


- Advertisement -