Farage confronts ‘dinosaur’ Bailey on Bank’s independence
Reform UK’s Nigel Farage and Richard Tice challenged Bank of England Governor Andrew Bailey on Treasury losses from quantitative tightening (QT) at a showdown meeting on Thursday morning, with market instability partly caused by the programme and stablecoins regulation raised as subjects of discussion.
Farage and Tice sat down with the Bank of England Governor to discuss the Bank’s recent decisions, with a meeting last week keeping interest rates at four per cent and slowing down QT in light of febrile markets.
Major central banks have dumped government bonds at a lower price to reduce the size of its balance sheet, though the Bank has received heavier criticism for selling gilts at a faster pace and at a lower price – at the expense of taxpayer cash.
Tice wrote to Bailey this summer to claim that commercial banks were earning excess profits as it took up bonds from the Bank, claiming it reflected a “systemic misuse of taxpayers’ money”.
The Bank of England Governor wrote back to defend its bond-selling scheme as it would “keep the benefit of lower debt costs for considerably longer than other countries”.
Meeting leads to call for debates in parliament
During the meeting, Bailey was told that interest on gilt holdings and losses from QT had triggered “tens of billions of taxpayer losses”.
A statement by Reform UK agreed there was an “important public policy debate” for parliamentarians to have on the matter.
“If parliament via the Chancellor of the Exchequer gave a different steer to the Bank of England this could significantly reduce the need for tax rises at the Budget,” Tice said.
“Subsequently I will be writing to the Chancellor and the Leader of the House requesting an urgent debate as soon as Parliament returns.”
In response to reports of Reform UK’s meeting the Bank, Shadow Chancellor Mel Stride accused opposition of “playing with fire”.
“Politicising interest rates and undermining the Bank’s independence risks instability and higher inflation – which means rising costs,” Stride said.
“Freeing interest rate decisions from political pressures was precisely why an independent monetary policy was established in the first place.
“Britain needs stability, not irresponsible stunts from Reform.”
The Bank has not calculated the total losses to the Treasury from the scheme. The Office for Budget Responsibility (OBR) has indicated that the programme is costing taxpayers around £18bn a year.
Monetary Policy Committee (MPC) members have disagreed on whether the pace of QT should have been slowed down from £100bn in the last year to £70bn next year.
Chief economist Huw Pill, who voted for the pace of QT to be maintained, said the Bank should send a consistent message to markets and not take into account potential costs incurred by the Treasury.
Farage’s first meeting with Bailey
Bailey and the Reform UK leaders also likely went head-to-head on the Bank’s independence.
Tice has said that intervention on the Bank’s independence would be considered if Reform were elected, a move which would represent the biggest change to monetary policymaking in the UK since Tony Blair was elected in 1997.
He has endorsed the view that at least one Treasury official should sit on the Monetary Policy Committee (MPC).
Some Labour members have taken the same stance. Bailey told MPs on the Treasury Committee that the independence of central banks was to “provide foundations” and financial stability for politicians to take decisions on tax and expenditure.
Bailey was pressed on his cautious approach to stablecoins as he has warned banks against issuing their own crypto assets, with Farage and Tice championing its potential for boosting the City.
Farage suggested Bank officials were “dinosaur bureaucrats” in an opinion piece for the Daily Telegraph.