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But fiscal space is a political construct, as Liz Truss painfully learnt. Who you tax, how and what you spend, and how you defend yourself against the bond vigilantes policing your moves are all political choices, informed by ideological visions and constrained by institutional set-ups. The Bank of England's role is rarely visible, by design. The Bank is supposed to stay out of fiscal affairs. Yet its invisible hand is now depleting the Treasury coffers to boost commercial bank profits. This is the consequence of the institutional arrangement for quantitative easing, through the Asset Purchase Facility (APF) run by the Bank of England. Unique in the world, the APF has cost the UK Treasury around £38bn in 2023 and a projected £40bn in 2024. The Bank of England has projected that under the "optimistic scenario, the Treasury will pay the APF around 110bn throughout a 2025-2030 government, and net costs could reach £230bn by 2033, beyond Labour's wildest green spending dreams.

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But fiscal space is a political construct, as Liz Truss painfully learnt. Who you tax, how and what you spend, and how you defend yourself against the bond vigilantes policing your moves are all political choices, informed by ideological visions and constrained by institutional set-ups. The Bank of England's role is rarely visible, by design. The Bank is supposed to stay out of fiscal affairs. Yet its invisible hand is now depleting the Treasury coffers to boost commercial bank profits. This is the consequence of the institutional arrangement for quantitative easing, through the Asset Purchase Facility (APF) run by the Bank of England. Unique in the world, the APF has cost the UK Treasury around £38bn in 2023 and a projected £40bn in 2024. The Bank of England has projected that under the "optimistic scenario, the Treasury will pay the APF around 110bn throughout a 2025-2030 government, and net costs could reach £230bn by 2033, beyond Labour's wildest green spending dreams.
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Pauline von Hellermann (pvonhellermannn@mastodon.green)'s status on Wednesday, 20-Mar-2024 05:41:50 JST Pauline von Hellermann
in reply to

#FollowTheMoney 🧵 6/n This is important: in contrast to most other Central Banks, which simply sit out losses, the Bank of England has an indemnity arrangement requiring the Treasury to cover its losses. This has resulted in £38-£40 billion going in effect from taxpayers to private banks in 2023, and same this year. Adding a second hashtag: #SEEtheOligarchy
FT article only for subscribers, I know (i get it through work). Here screenshots of key passages.
https://on.ft.com/4bUtp80

In conversation about 8 months ago from mastodon.green permalink