To ask the Chancellor of the Exchequer
(1) on how many occasions he has received notice from the Bank of England that it would support quantitative easing in the latest period for which figures are available; what the value was of the proposed quantative easing on each such occasion; and on how many occasions he supported such an easing;
(2) if he will make it policy that his Department controls the money that is released through quantitative easing;
(3) what assessment he has made of the implications for the economy of his Department not controlling the process of quantitative easing.
Quantitative easing (QE), or asset purchases financed by the issuance of central bank reserves, is implemented via the Asset Purchase Facility (APF), a subsidiary company of the Bank of England established in January 2009. QE was authorised in March 2009 by the then Chancellor in a published exchange of letters with the Governor of the Bank of England.
Decisions on the scale and speed of QE are those of the independent Monetary Policy Committee (MPC) which has operational responsibility for monetary policy as set out in the Bank of England Act 1998. QE is an additional policy tool to Bank Rate in order to enable the MPC to meet the inflation target in the medium term.
Given that HM Treasury indemnifies the Bank for any losses it makes arising out of the use of the APF, the Chancellor authorises, at the MPC's request, changes in the maximum amount of assets that can be purchased.
The MPC voted for an increase in asset purchases financed by the issuance of central bank reserves at the following times, which the then Chancellor authorised in published exchanges of letters with the Governor: March 2009 by £75 billion; May 2009 to a total of £125 billion; August 2009 to a total of £175 billion; and November 2009 to a total of £200 billion.
The Chancellor had made clear that he would follow the arrangements put in place in 2009 for authorising further asset purchases. The MPC has requested, and the Chancellor has authorised, an increase in the ceiling of asset purchases financed by the issuance in central bank reserves in October 2011 to a total of £250 billion; in February 2012 to a total of £325 billion; and in July 2012 to a total of £375 billion.
As the Chancellor's letters have made clear, monetary policy continues to have a critical role in supporting the economy as the Government delivers on its commitment to fiscal consolidation and it remains the primary tool for responding to changes in the economic outlook.