Review Bank’s independence, MPs demand
Threadneedle Street is out of step with other financial institutions, senior Tories warn the Chancellor
SENIOR Tory MPs have demanded a review into the Bank of England’s independence, warning that it is saddling taxpayers with “entirely avoidable bills”.
A group of more than 40 MPs has written to the Chancellor, saying they are “deeply concerned” that the Bank is acting in a way that is “out of step” with the central banks of most other major economies, which they say are “shielding their populations from the costs of unwinding quantitative easing”.
In contrast, they warn, the Bank has chosen an approach which costs the British public billions, “without any consideration of the costs or value for money for taxpayers”.
The MPs urge Jeremy Hunt to launch a review into the costs of its quantitative tightening programme as well as the Bank’s mandate and independence, adding: “We cannot afford to carry on down this path without consulting the public or Parliament.”
Signatories of the letter include Suella Braverman, the former home secretary, and former ministers Sir John Hayes, Sir Jacob Rees Mogg and Sir Simon Clarke.
They write: “The European Central Bank and the American Federal Reserve, along with many others, have decided to hold bonds on their balance sheets and run them off naturally as they mature, or wait for more market-friendly times to sell.
“This is at complete odds with the choice made by the Bank, starting in September 2022, to pursue aggressive quantitative tightening that forces taxpayers to bail it out for its losses.
“The Bank’s own estimates show that this approach will cost the taxpayer up to £130billion. This year alone the unelected Monetary Policy Committee plans to spend £40billion without any consideration of the costs or value for money for taxpayers.”
The letter was organised by the Conservative Way Forward (CWF), a Tory think tank, which this week will publish a report titled Bank of England: An International Outlier.
The MPs say in the letter: “This subject is too serious and the figures so vast that it must be debated and dealt with openly and transparently.”
It will pile further pressure on Andrew Bailey, the Bank’s governor, who has faced criticism in recent weeks.
Earlier this month, an independent review warned that the Bank’s ability to control inflation has been undermined by “significant shortcomings” in its economic forecasts.
An assessment led by Ben Bernanke, the former chairman of the Federal Reserve, said the accuracy of the Bank’s predictions had “deteriorated significantly” in the wake of the pandemic.
Mr Bailey vowed to learn from the report but refused to apologise, insisting: “We do not do hindsight.”
In February, a report by the Treasury Select Committee warned the Bank of England should not rush to print money during the next financial crisis. MPs said rules surrounding quantitative easing did not do enough to shield taxpayers from unnecessary losses.
A Treasury spokesman said: “The separation of fiscal and monetary policy is a key feature of the UK’s economic framework, and essential for the effective delivery of monetary policy.
“That is why it is vital the Government underwrites the Bank of England’s asset purchases so it can meet its monetary policy objectives, including returning inflation to 2 per cent.
“More than £120 billion has been transferred to the Treasury from the Bank of England between 2012 and 2022, details of which are routinely published. However, it was always expected that losses would be incurred when this was unwound, and any future gains or losses are highly uncertain.”