U.K. Treasury ‘Does Not Understand’ QE Risks, Panel SaysThomas Penny
The U.K. Treasury fails to understand the risks and potential benefits of the Bank of England’s asset-purchase program, a cross-party panel of lawmakers said today.
The department, headed by Chancellor of the Exchequer George Osborne, does not know what has happened to the 375 billion pounds ($581 billion) that has been injected into the economy as part of the so-called quantitative-easing program and the effect on output, the House of Commons Public Accounts Committee said in a report.
“The Treasury has not convinced us it understands either the risks it has taken on by indemnifying the Bank of England against losses on quantitative easing or the expected economic benefits,” the committee chairwoman, Margaret Hodge of the opposition Labour Party, said in an e-mailed statement today.
The Treasury has also funded lending programs that have failed to significantly increase credit, the committee said, and the department has failed to properly monitor the results.
“It has not set out its goals and intended outcomes, and it has limited management information to help it monitor progress, giving the impression of a series of expensive experiments indemnified with taxpayers’ money,” the report said. “We expected the Treasury to have a better understanding of the risks it had taken on and the effects of the money injected into the economy.”
High staff turnover in the Treasury has reduced its ability to deal with crises and effectively manage public spending, the panel said. Though turnover reduced to 16 percent in 2012 compared with 28 percent in 2011, it is still “very high,” the committee said.