The central bank is under fire from MPs for its Covid bailout scheme’s failure to protect jobs and the environment.
The Bank of England may attach climate conditions to its 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 environmental strings attached to their corporate bailout scheme.
As part of it’s work to tackle the economic fallout of Covid-19, the Bank of England created the Covid Corporate Financing Facility (CCFF) in March. A joint Bank and Treasury scheme designed to provide the UK’s biggest corporations with access to billions in cheap loans.
Pressed by MPs on the missed opportunity for CCFF loans to include 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 [Her Majesty’s Treasury], discuss how we could incorporate that in our remit.”
The Bank of England’s bailout scheme has helped prop up polluters and irresponsible corporations, as our report Where are the conditions for the billion £ bailouts published in July made clear. Airlines such as British Airways and EasyJet received £300 million and £600 million, respectively. Similarly, the Bank of England’s corporate bond purchases (commonly referred to as corporate quantitative easing) are currently skewed towards high-carbon sectors.
The Bank’s governor Andrew Bailey told the Treasury Committee when he first took up the post, that he would make decarbonising these asset purchases “a priority”, in response to an open-letter we coordinated demanding the Bank lead the way on climate change. But little to no progress seems to have been made, as fossil fuel companies remain eligible for the billions in corporate QE announced since then. As Sarah Breeden’s remarks this morning suggest, the Bank is yet to have crucial discussions with the Treasury on taking Bailey’s pledge forward, in relation to either the corporate bond purchases or the CCFF lending scheme.
Positive Money executive director Fran Boait told the Committee that 60% of firms receiving bailouts through the CCFF were laying off staff, while many continued to pay out dividends to shareholders despite these layoffs. Breeden was forced to admit that the Bank had failed to raise with the Treasury the possibility of attaching any conditions on jobs and climate to the bailouts, which Caroline Lucas MP went on to reprimand the Bank for. She made clear that “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?”
It’s hugely worrying that the Bank of England did not even raise the possibility of attaching conditions – which would have saved jobs and the environment to its corporate bailout scheme. But hopefully now the Bank will recognise the importance of attaching conditions to the public money it is handing out, 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, are in everyone’s long-term interests.
Unless the central bank acts now to ensure that public money is not subsidising the UK’s biggest polluters, the Bank will continue to undermine all talk of a fair, green recovery.