Select committee: Treasury Committee
Recommendation 22
Fifth Report - Quantitative Tightening
Published 7 Feb 2024
Paragraph 92
Addressed to HM Treasury
Treasury Committee Quantitative tightening All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Recommendation (the committee's words)
The Treasury should examine whether it is appropriate that ongoing indemnity payments are included in the debt targeted by the fiscal rules, subject to maintaining the credibility of the UK’s macroeconomic framework. For any future rounds of QT, the Treasury and Bank should commit to revisiting whether it would be possible and appropriate to account for profits and losses in a way analogous to the deferred or derivate asset approach being employed in the US and elsewhere. In particular, the 2012 decision to remit cashflows quarterly between the Bank and the Treasury should be reconsidered, should future QE generate profits.
From: Treasury Committee, Fifth Report - Quantitative Tightening (HC 219), paragraph 92, 7 February 2024
Government response
The government responded to the whole report on 18 April 2024 (deadline 7 April 2024).
Summary written by Accountability Index from the government's response. It is not the government's own words.The Treasury, the Bank of England and the Debt Management Office each responded separately, and the Committee records that none of its recommendations has been fully accepted.
- The Treasury says evaluating the overall value for money of monetary policy decisions on an ongoing basis "would not support" the MPC's independence, but that it keeps the design of the framework "under review".
- On the debt metric, the Treasury's position is that "substantial fiscal costs should not be excluded"; it says fiscal rules are "not a matter for the Bank of England".
- The Bank says a deferred asset accounting approach "would not be feasible", and that changing the accounting treatment "would not alter the underlying public sector impacts" of QE or QT.
- The Bank is "working at pace to launch an initial version" of a lending facility for insurance companies and pension funds, and says its next MPC QT review is in September.