Source · Select Committees · Treasury Committee
Recommendation 16
16
Accepted
Paragraph: 76
Chancellor’s role in approving APF changes for QE/QT remains unclear.
Conclusion
The Chancellor’s role in approving changes in the size or composition of the APF that houses the QE and QT programme remains unclear to us, since on one hand the Chancellor insists that decisions over QE and QT are taken independently by the MPC and cannot be commented upon, while on the other hand the Chancellor’s authorisation is “accompanied by assessment of the macro-economic and fiscal impacts.”
Government Response Summary
The government clarifies the Chancellor's role, explaining that while the MPC maintains operational independence, the Chancellor's authorisation for APF indemnity relates to Treasury's responsibility for public funds, involving assessments of fiscal and macroeconomic impacts.
Paragraph Reference:
76
Government Response
Accepted
HM Government
Accepted
The Committee asked HM Treasury to clarify the role of the Chancellor’s authorisation for changes in the APF indemnity. Firstly, we would like to be clear that the MPC has operational independence to achieve its monetary policy objectives, and can vote for any policy it assesses will best achieve those objectives, including QE. The Chancellor’s authorisation relates to the Treasury’s indemnification of the APF, as a vehicle to implement the MPC’s policy decisions. The Chancellor may authorise increases to the maximum size of the APF under the indemnity, being ultimately responsible to parliament for the spending implications. Each increase during successive rounds of QE was accompanied by Accounting Officer advice assessing the change against the Managing Public Money framework given the potential direct implications for public funds through the contingent liability created by the indemnity. This includes assessments for regularity and propriety, and assessments of the expected fiscal and macro-economic impact. This rightly reflects the responsibility on HM Treasury to properly assess the case for committing new public expenditure through expanding the APF indemnity and the associated contingent liability. The assessment does not assess decisions taken by the MPC in the first instance, but the increased contingent liability for the exchequer of an expanded APF.