Treasury's Economic 'Experiments' Slammed
Desperate government attempts to stimulate the economy have been criticised as "expensive experiments" by an influential group of MPs.
The Public Accounts Committee (PAC) said the Treasury did not seem to understand the risks and benefits of £375bn of quantitative easing (QE), while its flagship lending guarantee scheme had failed.
Chancellor George Osborne has continued the policy of QE - printing money in order to boost economic growth - since entering the department, despite in 2009, when in opposition, describing the move as "the last resort of desperate governments".
The controversial programme, also known as asset purchasing, began four years ago during Gordon Brown's premiership in response to the financial crisis. While some welcome it as a stimulus to fragile economies, it also pushes down annuity rates, adversely affecting pension schemes, and can push up inflation.
The MPs expressed concern that the Treasury had a "limited understanding" of its role in QE, and pointed out that the National Loan Guarantee Scheme - intended to help firms access cheaper lending - had only achieved 15% of planned take-up.
The initiative had been superseded by the Bank of England's more generous Funding for Lending scheme.
The verdict was delivered in the cross-party committee's report into the Treasury's performance in the last financial year.
"The Treasury has limited understanding of its role in these measures. 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 committee warned.
PAC chair Margaret Hodge said the support provided to banks during the credit crunch had helped prevent the banking system from collapsing.
"We are pleased that the Treasury has successfully withdrawn nearly all of the taxpayer guarantees to banks. But the taxpayer still owns some £66bn of shares in RBS and Lloyds, a sum which is yet to be recovered," she said.
But the Labour MP added: "The Treasury has not convinced us it understands either the risks it has taken on by indemnifying the Bank of England against losses on QE or the expected economic benefits.
"Some £375bn has so far been injected into the economy as an 'experiment' but the department could not explain to us what the effect has been on the whole economy or on different parts of society."
The Treasury was also rebuked by the PAC for not getting a grip on spending across Whitehall, and "impenetrable" book-keeping.
In response to the report, a Treasury spokesman said: "The Treasury is focused on its job to support the Government's strategy to deal with the country's debts and rebalance the economy to ensure Britain succeeds in the global race.
"Over the past two years over a million private sector jobs have been created, the deficit has been reduced by a quarter and interest rates have been at near record lows, benefiting businesses and families."