Treasury Gets £35bn Windfall From QE Interest
The Treasury is to receive a £35bn boost as part of a deal with the Bank of England that will effectively reduce public debt.
Chancellor George Osborne and Bank Governor Sir Mervyn King have agreed that the BoE will give the Treasury interest earned through its £375bn economy-boosting programme known as quantitative easing (QE).
The cash - currently on the BoE's books - will flatter the public accounts by reducing the budget deficit, while also acting as a "small loosening of monetary conditions" equivalent to taking more QE action, according to the Bank.
The announcement comes a day after it decided not to extend QE at its monthly policy-setting meeting.
The Treasury said the agreement was in line with similar practices surrounding QE in the United States and Japan.
In a letter to Mr Osborne, Sir Mervyn stressed the cash transferred to the Government would likely need to be paid back to the Bank in the future.
The move comes at an apt time for Mr Osborne as he faces pressure on his plans to cut borrowing.
But JP Morgan Chase economist Malcolm Barr said it was "still likely" that the Chancellor will need to push back debt reduction targets in his upcoming autumn statement.
Shadow chief secretary to the Treasury Rachel Reeves said it was a "smoke and mirrors" deal.
"Instead of changing course and taking action to create the jobs and growth we need to get the deficit down. The Chancellor seems to think he can just be bailed out in the short term by money from the Bank of England," she added.
Under the arrangement, £11bn is expected to be handed to the Treasury this year, with the remaining £24bn paid in four instalments over the next financial year.
what do you think?
Good news !!
Yes, good one Ossie.
Osborne borrows 14 billion a month and cuts money to the Armed forces to 4.8 billion for 1 year and gives 12.6 billion overseas per year and 12.1 billion to police per year and 38 billion to the EU and about 2.8 trillion to the public sector but he is cutting everything for the poor and middleclass
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The 12billion given away overseas is the one that concerns me when we need it here. Give it overseas later when we are sorted out. Cant see the point of our poor & aged paying for the upkeep of some other countries poor & aged. America has chosen the opposite method to Osborne by raising tax on the wealthiest and trying to create jobs. While Ossy hits the poor here and no job creation. Wonder who's method will be the winner Obama or Osbourne?
Stop printing money you are creating inflation , increase interest rates our food and fuel prices are rising due to this insane paper money printing.
Happy mike where have you been living - interest rates have remained the same for several years your usual rap - sorry about the silent C
inflation ? ......snort !
mmm yes lets raise interest rates so it becomes to expensive for firms to borrow money to invest then we caqn lose our jobs and our houses too yippee double whammy
So you manufacture some money then lend it to yourself and then get get the interest on the loan and then call it a windfall! Isn't this where we came in? Sounds like a bit of creative accountancy to me.
Away you go negs.....get stuck in
they are only happy when they are unhappy
could do with printing myself a few quid
creative accountancy ?... thats about the only thing governments and the ons are any good at . of course we call it fraudulent accounting , buthey we are not in charge of national statistics
i printed some money myself then lent to me and then paid the interest back to me and that way cleared all my debts now i will start to pay the mortgage on the interest i never had if only the shops would take my money but they say mickey mouse is not real
Better we give it to Greece?