MPs have hit out at the Treasury for indemnifying the Bank of England against losses from its £375bn quantitative easing programme, claiming it does not understand the risks involved.
The Public Accounts Committee has published a report today into the activities and role of the Treasury, in which committee chair Margaret Hodge criticises the Treasury for “impenetrable” accounts and unsuccessful attempts to stimulate growth through new lending.
Labour MP Hodge says: “The Treasury has not convinced us it understands either the risks it has taken on by indemnifying the Bank of England against losses on QE or the expected economic benefits. Some £375bn has so far been injected into the economy as an ‘experiment’ but the department could not explain to us what the effect has been on the whole economy or on different parts of society.
“The Treasury acts as both the finance ministry and economic ministry. But it appears to neglect its role as finance ministry. Its own accounts are impenetrable and this committee keeps seeing instances of poor decision making by departments, which the Treasury could and should have prevented.”
The committee has also raised concerns about the National Loans Guarantee Scheme achieving just 15 per cent of the intended take up, saying the Treasury needs to be clearer about what it wants the Bank to achieve.
Hodge says: “These measures are characterised by a lack of goals and intended outcomes, with no means of monitoring progress. Throughout, the Treasury seems to be embarking on a series of expensive experiments, indemnified with taxpayers’ money.”
IMLA executive director Peter Williams says: “Given the kind of experimentation the bank and the Treasury have been engaged in regarding financial policy, nobody could be clear about the outcome. In some senses we are in unknown waters here and it would be very hard to set precise outcomes when you don’t quite know how the thing works.”