- Only 15% of MPs polled know that new money is created when banks make loans
- 19% of Tory MPs are aware of this, compared to only 5% of Labour MPs
- 70% of all MPs believe only the government has the authority to create money
London, UK, 26 October 2017 — Polling from research and campaign group Positive Money has revealed a shocking ignorance of the UK’s money and banking system across the House of Commons, with only 15% of MPs aware of how most money is created in the modern economy.
The poll, undertaken by Dods after the 2017 general election, gave MPs from across the House four statements about the UK’s money and banking system, asking them to say whether they are true or false.
Only 15% of MPs were aware that new money is created when banks make loans, and existing money is destroyed when members of the public repay loans, with 62% believing this to be false, and 23% responding ‘don’t know’. Tory MPs seemed to be less ignorant in this regard, with 19% answering correctly, compared to only 5% of Labour MPs.
As explained in the ‘Money creation in the modern economy’ report published by the Bank of England in 2014, most money takes the form of bank deposits, which are principally created through commercial banks making loans: “Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.” The most recent figures suggest that 97% of money exists as bank deposits, with only 3% created by the Bank of England and Royal Mint as cash.
70% of MPs incorrectly believed that only the government has the authority to create all new money – including the electronic money in personal bank accounts – with only 23% knowing this to be false, and 6% answering ‘don’t know’. Labour performed slightly better on this question, with 29% of Labour MPs answering correctly, compared to 25% of Tory MPs.
Fran Boait, Executive Director of Positive Money, said: “Despite their confidence in telling the public that there is ‘no magic money tree’ to pay for vital services, politicians themselves are shockingly ignorant of where money actually comes from.
“There is in fact a ‘magic money tree’, but it’s in the hands of commercial banks, such as Barclays, HSBC and RBS, who create money whenever they make loans. Unfortunately this privilege is used in ways which don’t benefit most of society. Over 80% of new bank lending in our economy is directed towards property and financial markets, which is making housing unaffordable, increasing inequality and resulting in more and more people drowning in debt.”
Notes
Figure 1: Full breakdown of the data
Positive Money commissioned Dods Research to poll MPs on knowledge of money and the banking sector between June and August 2017 using an online survey. 50 MPs of all parties and regions of the UK completed the poll and the results were weighted by Dods Research to accurately reflect current party composition in the House of Commons.
Fran Boait, Executive Director of Positive Money, is available for briefings and interviews and is able to travel to studios. Please contact David Clarke at david.clarke@positivemoney.org.uk or 02072533235 / 07849598558 for more details.
About Positive Money
Positive Money campaigns for a money and banking system that supports a fair, democratic and sustainable economy. Set up in the aftermath of the financial crisis, we are a not-for-profit company funded by small donors, charitable trusts and foundations.
