Published on 30th November 2023

The Treasury Select Committee on 22nd November finally succeeded in cornering the Bank of England about key features of their bond buying (Quantitative Easing) and selling (Quantitative Tightening).

The upshot is that further questioning, apart from nailing down one or two details about how the new Bank Levy can be used, can now focus solely on the elephant in the room: the nature and degree of the Bank’s independence. The questioning was led by Danny Kruger MP.

You can listen to the exchange here.

The nub is that, with the benefit of the indemnity from HMTreasury, the Bank of England need take no heed at all of the risks to the public exchequer that derive from its own ‘monetary policy’.

This formulation needs now to be subjected to rigorous debate. It infers that the Bank can undertake operations which it defines as ‘monetary policy’ and which it can therefore execute within its remit without challenge. The results of these policies can have major impacts on spending, borrowing and taxation but the Bank’s ‘monetary policy’ can be considered in isolation from these impacts.

The QT losses are running at about £20 billion a year with the Bank holding on to its portfolio of £700 billion of bonds, or else it could realise a lump sum loss of £150 billion.

Is it realistic that we have a central bank that can go so far ‘off the reservation’ as far as the country at large is concerned but not, apparently, stray from its remit?

The nature and degree of the Bank’s ‘independence’ now needs to be properly debated, rather than the Bank being treated as a sacred cow operating within its own inviolable preserves and ultimately answerable only to itself.