Public Accounts Committee slams Treasury

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As you may be aware, the Treasury Select Committee is currently holding an inquiry into Quantitative Easing. However, the Commons Public Accounts Committee – which aims to ensure the taxpayer is getting value for money – has also been looking at the role of the Treasury with respect to QE and other assorted attempts to boost the economy.

It was less than impressed. The Committee found the Treasury’s accounts so “impenetrable” that it had to call for another report to explain them! This “is of particular concern when the Treasury should be a leading proponent of clarity in financial reporting.” One MP suggested that, in future, the Treasury should get the Plain English campaign to turn their report into more accessible language.

The Committee were extremely critical of the way the Treasury had implemented various lending schemes which, had in fact, failed to increase lendin, and of the way in which it had indemnified the Bank of England against losses on Quantitative Easing. “The Treasury has limited understanding of its role in these measures,” said the Committee. “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 Treasury is at sea over QE

The Committee’s conclusions on Quantitative Easing were damning in the extreme. “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 benefits. The indemnity creates substantial taxpayer exposure, but the Treasury is not clear on how Quantitative Easing is to be evaluated or what the intended outcomes are. It does not know what has happened to the amount – some £375 billion so far – injected into the economy, or how the effects might be distributed across society. The Treasury must provide more transparency on what Quantitative Easing is seeking to achieve.”

Giving evidence to the Committee, Sir Nicholas Macpherson, the Treasury Permanent Secretary, said, “When we set it up, we did not anticipate that Quantitative Easing would last as long as it has; nor did we anticipate that such a large fund would be built up.”

“When we set it up, we did not anticipate that Quantitative Easing would last as long as it has; nor did we anticipate that such a large fund would be built up.”

The Committee said it “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 under this measure. The only information on how it had influenced the economy was produced by the Bank of England when the scheme was £200 billion in size. The scheme now stands at £375 billion and the Treasury could not explain how the later tranches had affected the economy as a whole, how any effect was distributed across society, or how the banks had changed their behaviour after selling gilts to the Bank of England. The Treasury described the scheme as an experiment whose full result would not be known for many years.”

The Bank of England runs rings around the Treasury

You would imagine that a policy as far-reaching as Quantitative Easing – which has seen the Bank of England spend £375 billion to buy up a third of all existing government stocks – would have come about as a result of detailed discussions between our central bank and the Treasury. Yet this report makes it abundantly clear that the Treasury had only the slightest idea what it was letting the British taxpayer in for, what the results would be and what the consequences – and the eventual bill – might be.

Instead of holding the Bank of England to account, the Treasury was effectively giving it a free hand. The Bank would have appreciated the inadequacies of Treasury officials and realised that they were unlikely effectively to challenge any proposals made by Sir Mervn and his cohorts.

This is not only a devastating indictment of the most important of all government ministries but a slap in the face for the British taxpayer. It is appalling that it has taken four years for parliament to look in detail into this extraordinary financial experiment, which has had such appalling consequences for savers and pensioners and which has redistributed wealth to the wealthiest at the expense of the rest of us.

As an aside, given how rarely the interests of savers are heard on the lips of our MPs, a little kudos should go to Ian Swales, LibDem MP for Redcar who, when QE and its inflationary impact was being discussed during the evidence sessions, said: “It has also had a depressing effect for savers, of course, which affects a lot of our constituents.” An MP who appears to have been listening. Remarkable.

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4 Comments

1. frances

   February 19, 2013 at 2:01 pm

   I have already sent to TSC the effects of QE on my Savings income
   Plus what FLS has had on it
   Result is a comfortable 16K of interest income with only 63pound a week of statepension has been reduced to a total of 7K

   I cared for my own children
   a sick husband
   elderly parents
   and grandkids

   My immense prudence over 40 years plus the portion
   of my inheritance all of which was taxed to the hilt has resulted in claims by TSC to be a HUGE pot on which i have no right to receive 10% savings tax

   I am so incensensed as to be be speechless at the millions the HMRC waste on never dealing with tax dodgers or the likes of Starbucks or even Geirge Osbournes own family company of Osbourne and Little

   Clearly its the little people who pay the bills not the big companies with expensive lawyers !!!!!!!!!!!!!!!!!!!!!!!!!

   Recommend (18)
2. John.

   February 19, 2013 at 4:04 pm

   The treasury is little more than a revolving door to government run by a gallery of rogues doing the city and banksters bidding, providing access to public funds for private profit and favours. It’s all about the money, money, money. Enough is never, ever enough. Rapacious greed is in the DNA of these reptiles. The whole rotten corrupt edifice stinks, there’s little wonder they produce impenetrable reports, aren’t all thieves evasive?

   It’d be very strange indeed if they produced anything substantial, with clarity and integrity that accurately detailed the deception and theft they’re embroiled in. Can anyone reasonably expect them to do that? They’d be swinging from lamp posts.

   Recommend (12)
3. DL

   February 20, 2013 at 11:01 am

   In other words the Treasury is being run by a bunch of career minded “I’m all right Jack” amateurs. And as for the BOE …..! The whole system is rotten to the core and shows that Parliament has either no understanding of basic finance or has lost complete control. As usual its the taxpayers and decen citizens of the country who pay and suffer. I am so angry I feel like emigrating – preferably to another planet!

   Recommend (10)
4. Anne

   February 20, 2013 at 6:58 pm

   Today I received a letter from my bank,informing me that the interest rate on my savings account would shortly be falling, I thought readers might like to share the content of my response to them.

   Thank you for your communication of February 2013 regarding changes to savings interest rates.

   Hark! Hark! It is with wonderful news that I write of a welcome fall in interest rates to savers. We have found a way of paying our customers even less than the peanuts we have been paying them since our champions, Sir Mervyn and his compatriot Mr.Osborne (or is it the other way round) discovered a way of seemingly destroying the economy.

   We are `over the moon` about our latest announcement and now look forward to paying our loyal customers an even lower return on their money.
   Indeed we are patting ourselves on the back and looking forward to even greater profits, which will find its way in to the pockets of already wealthy men at the top and make them even wealthier, to the detriment of our already struggling customers and in particular pensioners, whose income will be blighted even further by our decision to pay our customers a newer, even lower, return on their money, (known in the business as “Crumb-Gain Activity”) and in spite of the pound sterling being practically worthless and hyper-inflation having also taken a bite. This is being done because we want to help the economy to sink even further into recession by helping the government achieve its objectives in further reducing the amount of money people have in their pockets, because having money to spend within the economy, helps the economy to grow, which is counterproductive to current fiscal policy. Putting a freeze on money and of course reducing the rate of interest to savers (who are, admittedly, the backbone of the economy and without whose help and prudence the country would not be able continue to pay its way),removes the amount of money that people have, to put into the economy, which in turn causes businesses to collapse and people to lose their jobs ,which is why we are so keen to have a downtrodden economy, which will not be achieved satisfactorily until complete meltdown has taken place.
   Of course, we want to remain competitive in the savings marketplace, which is why we are reducing our rates in line with other institutions . This is because if we did not, customers would still be receiving a return `higher` than the MPC would currently like people to have, although we do appreciate that such a miniscule amount would, in real terms, be completely insignificant. We also realise that it would be unfair to our competitors should we as a business continue with a raised profile which would have the potential to flatten that of our competitors.
   In the modern day world `being competitive` no longer has the same meaning as it once did, Today,` being competitive`, means ensuring there is little choice anywhere for customers in the financial marketplace give or take a` temporary low-customer-gain margin` should one or other institution need to re- balance its customer base, although it must be remembered that we now have FFL, making the need for customer-based saving much less necessary whilst at the same time increasing the banking systems capacity for greater profit, (growth) uncompromised. Also we must realise that if our CGA (Crumb-Gain Activity) were raised even slightly above the competitive rate, which would in effect de-stabilise the government’s policy of a continuing downward spiral in an already downtrodden economy, we would inevitably find ourselves in the situation of having to follow suit and compete for fewer customers and maybe, as the Chancellor, the Governor of the Bank of England and the Government, continue to persist with fiscal policies that quite clearly don’t work, even lowering interest rates yet again and as the policies continue to fail, the likelihood is that we may be able to bring our loyal customers the good news of paying them no interest at all on the money they have loyally invested with us, in some cases over many years. This way we can look forward to hoping to borrow it completely free, and the good news is we are nearly there.

   We do however hope that you will agree that our loyal service and commitment to our customers and of course, our highly competitive rates, offering you genuine value right across the whole range of savings accounts, will be enough for you to take your money away and save us the task of having to tell you in even more exciting terms, that actually, we don’t need your money at all (hoorah!) but should you decide to stay, we will be more than happy to make use of your money in potentially lining the pockets of the wealthy at the expense of the poor, from whom the wealth was acquired in the first place.

   Should you wish to talk about the changes, please don’t hesitate to phone. All members of our team have been trained in what to say to our customers in helping them feel happy and elated at receiving even less for their money (hurrah!)

   Lord W. Robbers, MBE, Msc (Hons) oxon. Economist. Bsc (Hons) Politics, MEP
   Current Government Think Tank and Bank of England MPC.

   Yours sincerely,

   (name supplied.)

   thought readers would be interested in reading my response to them. (Below.)

   Recommend (11)