The Bank of England
's quantitative easing scheme, authorised by the Treasury is now worth £375bn (Reuters)
MPs on the Public Accounts Committee have lashed out at the Treasury for not understanding the economic impact of the stimulus measures it has introduced alongside the Bank of England.
A total of £375bn has been pumped into the Bank of England's asset-purchasing quantitative easing (QE) programme, with a further £80bn set to channelled the Funding for Lending Scheme (FLS), which is designed to free up affordable finance at British banks.
"These measures are characterised by a lack of goals and intended outcomes, with no means of monitoring progress," said Margaret Hodge MP, chairwoman of the PAC, which has published its annual report on the Treasury.
"Throughout, the Treasury seems to be embarking on a series of expensive experiments, indemnified with taxpayers' money."
The Treasury has been told to make its role in the stimulus schemes clear, as well as clarify the goals and effects of these efforts.
Ministers must work with the Bank of England to conduct a study on the impact of QE so far, said the PAC.
Under QE, the Bank of England buys up assets, mostly gilts, from the market in order to improve liquidity. This has helped hold down yields on UK sovereign debt, which have hit record lows in recent months.
It has been running since January 2009, with an original target value of £200bn, and was one of the earliest responses to the unfolding financial crisis.
Some economists think an extra £50bn of asset purchases will be made in the coming months under QE, though others argue it is no longer effective and the focus should now be on the FLS and freeing up credit at squeezed banks.
FLS sees banks offered cheap loans in the hope that this incentivises increased lending at affordable rates to the real economy of small businesses and consumers.
So far it has had an impact on the residential mortgage market, bringing down deposit requirements and interest rates, but FLS has been criticised by Parliament's Treasury committee for not having enough of an impact on credit affordability for smaller firms.
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