Central bank under fire from MPs on its Covid bailout scheme’s failure to protect jobs and the environment
The Bank of England may attach climate conditions to asset purchases, a senior Bank of England official told MPs on the Environmental Audit Committee this morning, after coming under fire for the lack of strings attached to bailouts through the Covid Corporate Financing Facility (CCFF).
Pressed by MPs on the missed opportunity for CCFF loans to have included conditions, such as mandatory climate-related financial disclosure, Sarah Breeden, the Bank of England’s Executive Director for UK Deposit Takers Supervision, said:
“That is exactly the sort of thing that we’re considering in relation to our corporate bond purchases… In the context of the long-term investments that we’re making, that is the sort of condition that we are discussing internally, and will, with HMT, discuss how we could incorporate that in our remit.”
Commonly referred to as corporate QE (quantitative easing), the Bank of England’s corporate bond purchases are currently skewed towards high-carbon sectors, with the Bank offering to buy up bonds from the likes of Shell and BP with newly created publicly money. Andrew Bailey told the Treasury Committee in March that as BoE governor he would take forward proposals to decarbonise these asset purchases as “a priority”, in response to an open-letter coordinated by Positive Money. However, little progress seems to have been made, with fossil fuel companies remaining eligible for an additional £10bn of corporate QE announced since, while Breeden’s remarks this morning suggest that the Bank is yet to have crucial discussions with the Treasury on taking Bailey’s pledge forward.
Breeden was reprimanded by Caroline Lucas MP on the CCFF’s failure to protect the environment and jobs, after Positive Money’s Fran Boait told the Committee that 60% of firms receiving bailouts through the scheme were laying off staff, while many were continuing to pay out dividends to shareholders. Breeden was forced to admit that the Bank failed to raise with the Treasury the possibility of attaching conditions on jobs and climate to bailouts.
“I would just put it to you, we don’t just face a Covid crisis, we face a climate crisis. The climate has not gone on furlough, the climate crisis is accelerating. And if we’re not very careful, we’re going to be jumping out of the Covid frying pan into the climate fire. Because this was a wonderful opportunity here, to make sure that these companies did what frankly is an incredibly small requirement, to have that kind of level of disclosure. Can you really explain why that didn’t happen?”
Responding to Sarah Breeden’s remarks, Fran Boait, executive director of Positive Money, said:
“It is hugely worrying to hear the Bank of England confirm that it did not even raise the possibility of attaching conditions which would have saved jobs and the environment to its corporate bailout scheme. It is precisely because of the lack of conditions that the CCFF is failing its own stated objectives, with 6 in 10 companies receiving funds cutting jobs, while many continue to pay out dividends to shareholders.
“Hopefully the Bank now recognises the importance of attaching conditions to public money, and will ensure that jobs and climate are at the centre of policies going forward. Conditions such as requiring corporations to disclose climate risk and set out how they will align themselves with the government’s net zero target will not cost a single job, and are in everyone’s long-term interests.
“Andrew Bailey told MPs back in March that as Bank of England governor he would make decarbonising its QE programme ‘a priority’, so it is disappointing that the Bank seems to have made little progress on this pledge in the months since. Unless the central bank acts now to ensure that public money is not subsidising the biggest polluters, they will continue to undermine all talk of a fair, green recovery.”
- Sarah Breeden and Positive Money executive director Fran Boait’s appearance in front of the Environmental Audit Committee can be viewed in full here: https://parliamentlive.tv/event/index/78b1cfdf-59b5-43dc-b73a-c230390d8482
- Positive Money released a report on the failures of the CCFF, alongside polling showing that two thirds of the public support social and environmental conditions for such bailouts, in July: https://positivemoney.org/2020/07/two-thirds
- Positive Money campaigns for a money and banking system which supports a fair, democratic and sustainable economy. Set up in the aftermath of the financial crisis, Positive Money is a not-for-profit company funded by charitable trusts and foundations, as well as small donations from its network of over 65,000 supporters. https://positivemoney.org/
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