Stop Hunt handing billions to banks
Chancellor Jeremy Hunt, and Bank of England Governor Andrew Bailey
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We call on the Chancellor and Governor of the Bank of England:
Don’t give the banks billions of pounds of public money - amidst a cost of living crisis and public spending cuts, it would be a grossly unfair thing to do
Launch a review of the current macroeconomic and monetary policy frameworks - the responses by the government and Bank of England to the cost of living crisis aren’t working and shows there's urgent need for a rethink
Background information:
While we brace for more cuts to public services, banks are quietly set to get an estimated £80 billion from the government over the next two years for nothing. The government and Bank of England’s response to current crises shows there’s clearly a need for a rethink of economic policymaking in the UK.
This billion pound handout for bankers has come about because of the way our central bank, the Bank of England, enacts monetary policy. It currently relies almost exclusively on interest rates to manage inflation, and implements these rates by paying interest on the reserves commercial banks hold at the central bank. With interest rates rising, the amount being paid to banks on their reserves is therefore increasing. The former Bank of England deputy governor Paul Tucker recently calculated that expected interest rate increases mean that banks will receive around £80 billion of public funds over the next two years for nothing through this process. [1]
The fact banks are set to receive a huge windfall while everyone else is struggling, combined with the chaos around the mini-Budget where the government ended up in a stand-off with the Bank of England, shows we need an urgent rethink of the current policymaking framework. [2] The last time the government did a review of the monetary policy framework was in 2013, under very different circumstances. [3] It said it would publish another review by the end of 2019. But as we near the end of 2022, this review is nowhere to be seen.
Rather than enforcing more austerity, Jeremy Hunt should end the huge giveaways to the banks and launch an overdue review into the way the Bank of England conducts monetary policy, and the broader macroeconomic policymaking framework.
Notes:
[2] https://www.politico.eu/article/truss-vs-the-bank-of-england-mini-budget/
[3] https://www.gov.uk/government/publications/review-of-the-monetary-policy-framework
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To:
Chancellor Jeremy Hunt, and Bank of England Governor Andrew Bailey
From:
[Your Name]
We call on the Chancellor and Governor of the Bank of England:
Don’t give the banks billions of pounds of public money - amidst a cost of living crisis and public spending cuts, it would be a grossly unfair thing to do
Launch a review of the current macroeconomic and monetary policy frameworks - the responses by the government and Bank of England to the cost of living crisis aren’t working and shows there's urgent need for a rethink
Background information:
While we brace for more cuts to public services, banks are quietly set to get an estimated £80 billion from the government over the next two years for nothing. The government and Bank of England’s response to current crises shows there’s clearly a need for a rethink of economic policymaking in the UK.
This billion pound handout for bankers has come about because of the way our central bank, the Bank of England, enacts monetary policy. It currently relies almost exclusively on interest rates to manage inflation, and implements these rates by paying interest on the reserves commercial banks hold at the central bank. With interest rates rising, the amount being paid to banks on their reserves is therefore increasing. The former Bank of England deputy governor Paul Tucker recently calculated that expected interest rate increases mean that banks will receive around £80 billion of public funds over the next two years for nothing through this process. [1]
The fact banks are set to receive a huge windfall while everyone else is struggling, combined with the chaos around the mini-Budget where the government ended up in a stand-off with the Bank of England, shows we need an urgent rethink of the current policymaking framework. [2] The last time the government did a review of the monetary policy framework was in 2013, under very different circumstances. [3] It said it would publish another review by the end of 2019. But as we near the end of 2022, this review is nowhere to be seen.
Rather than enforcing more austerity, Jeremy Hunt should end the huge giveaways to the banks and launch an overdue review into the way the Bank of England conducts monetary policy, and the broader macroeconomic policymaking framework.
Notes:
[1] https://ifs.org.uk/publications/quantitative-easing-monetary-policy-implementation-and-public-finances
[2] https://www.politico.eu/article/truss-vs-the-bank-of-england-mini-budget/
[3] https://www.gov.uk/government/publications/review-of-the-monetary-policy-framework