Quantitative Easing — House of Commons, 2016-09-15
Topic: Macroeconomics
Helen Catherine Goodman (Labour, Centre-left): What the hon. Gentleman says is absolutely fair, and I agree with him. I would not go so far as to say, "Labour QE good, Tory QE bad"—I think that would be slightly Orwellian—and, as I said initially, I was not saying that I did not think there should have been another package this summer. My questions are about the way in which that is done Along with the hon. Member for Wycombe, I have quizzed the Bank of England about the matter on three separate occasions. On the first occasion, when I asked the Governor about the distribution impact, he said that taking account of distribution would be political. I cannot see how giving wealthy people more assets is not political. However, we have questioned the Bank more recently, and it seems to me that people in different parts of it say different things. I think it would be unfair to say that they speak with forked tongues. However, on one hand the chief economist, Andy Haldane, has said that monetary policy "cannot close other structural faultlines across the UK economy – for example, regional, socio-economic, inter-generational… Monetary policy cannot set different interest rates for different regions", and also that UK recovery has been "for the few rather than the many" That seems to be a criticism of an unequal society. Andy Haldane seems to be saying that this is not good socially and it is not good economically On the other hand, when the Treasury Committee questioned Sir Jon Cunliffe on the matter, he said: "I would only point out that we have the tools we have." That is a bit like "Brexit means Brexit". It is a rather gnomic and unhelpful approach. I think it is stalling; I think that the Bank does not want to look at different ways of carrying out QE, and I do not think it is being sufficiently imaginative In January I visited the European Central Bank in Frankfurt and asked how it does QE. It does it in different ways, and it is able to do so in part because the financial infrastructure is different in other countries. For example, it does not just buy Government bonds and gilts; it buys bonds in KfW and CADES—the German and French infrastructure banks—and it has a special strand that aims to get more money into the small and medium-sized enterprise sector. So I do not accept the Bank of England saying, "We have the tools that we have and there is nothing different we can do." I commend to the Bank some work that the New Economics Foundation has done on this. It seems to me that the Bank could be buying investments in housing associations, for example. In fact, that would be a much better way of dealing with our housing crisis than giving a lot of money to rich people, thereby pulling up property prices. I do not think that the Bank has a very good understanding of the housing market—we have quizzed its officials on that as well. For example, the Governor told us last week: "Housing finance in this economy is quite sophisticated" I do not think that it is sophisticated; I think that it is quite dysfunctional, because we are seeing more and more money going into people exchanging properties, rather than going into more building, which is what would actually make a difference to the housing crisis I really hope that the Bank will not only better analyse what it is doing, as the motion suggests—it did commit to come back in September 2018 with renewed analysis of the impact on assets and wealth distribution of this further round of QE—