Sunak needs to pull his weight and spend more, after BoE buys up £150bn more bonds

London, 5 November 2020 – Responding to the Bank of England announcing another £150bn of quantitative easing (QE) ahead of the Chancellor’s statement this afternoon, Fran Boait, executive director of Positive Money said:

“The Bank of England’s decision to buy up another £150bn of government bonds ahead of the Chancellor’s statement this afternoon is a welcome sign of further monetary-fiscal coordination. Our central bank is willing to help finance government spending to help us get through this crisis, and that should be embraced. Sadly the Chancellor seems to be spreading irresponsible myths that there are hard constraints on public spending, even when interest rates on government debt are negative and inflation remains well below target.

“Monetary policy alone isn’t enough. The fact negative interest rates are even being considered should be a warning sign that the Chancellor needs to pull his weight and spend more. The Treasury must take advantage of the increased headroom afforded by the Bank of England’s bond purchases to boost spending to fund public services, protect incomes and kick-start a green recovery.

“If the government is unwilling to spend more, the Bank of England should make it even easier for them. Rather than taking interest rates negative, the Bank of England could directly credit the government’s ‘Ways and Means’ overdraft with funds for the Treasury to spend.”

Notes

1. The Chancellor has reportedly warned the Cabinet that the government may face issues funding public services: https://www.telegraph.co.uk/politics/2020/11/01/second-lockdown-poses-threat-funding-public-services-rishi-sunak

2. A Positive Money video debunking the Chancellor’s fearmongering over government spending has caught the attention of MPs, receiving more than 150,000 views on Twitter in recent days

3. The Treasury and Bank of England announced an extension of the government’s ‘Ways & Mean’s overdraft in April: https://www.gov.uk/government/news/hm-treasury-and-bank-of-england-announce-temporary-extension-of-the-ways-and-means-facility

4. 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/
   For more information or to arrange a briefing/interview with a spokesperson please contact press@positivemoney.org.uk or Simon Youel on 07817765517