Committee chairman Labour MP John McFall repeatedly asked the Chancellor about this option known as “quantitative easing” following a press report that the Bank of England could take this action over the Christmas break without the approval of Parliament.
Darling played down the need for such a dramatic response noting that interest rates are still 2 per cent and urged MPs not to get “too excited” by the media speculation, however he stopped short of ruling out the policy of printing more money to combat deflation.
Darling said that the Bank of England would need Treasury approval to take this measure but was unsure whether Parliamentary approval had to be sought.
The Chancellor also revealed that the UK was likely to enter a recession before starting to recover in the second half of next year.
Darling revealed that take up of the Government credit guarantee scheme has so far reached £100bn and signaled he would be prepared to extend the scheme, but said banks still need to “much more” to make credit available at reasonable rates to individuals and small businesses.
He said: “I’m prepared to look at a number of things that will make it more likely for banks to lend, however from the banks point of view they have to understand that with billions of pounds of taxpayers’ money either invested in shares or being made available through guarantees, the general public are entitled to something in return.”
Labour MP for Newcastle Upon Tyne Central Jim Cousins said: “You indicated this afternoon that with regard to the banks, you are willing to consider stronger measures of support and guidance.
“Wouldn’t it be better to buy existing assets and guarantee new assets in line with the [Crosby] report – wouldn’t it be wiser to do that now than allow queues of industries, like cars and construction to build up, wanting specific schemes of support?”
Darling said: “We are looking at a range of measures to build on the announcement in October, but if we are going to do that then it has to be quid pro quo as far as the banks are concerned.
“I think it would be much. much better if we could get the banking system working productively, but in relation to large companies it is not just through banks that they raise their money.”