Economy: Quantitative Easing

Lord Pearson of Rannoch Excerpts

Monday 19th March 2012 Lords Chamber

[Lord Sassoon]

No, my Lords, even the previous Chancellor, I am happy to say, was not acting illegally in this matter and the current Chancellor certainly is not. As I have already explained to the noble Lord, Lord Barnett, the only reason for the Chancellor having to authorise this is because HM Government indemnify the Bank for any losses that it may suffer by exercising purchases under the asset purchase facility.

[Lord Pearson of Rannoch]

My Lords, does the noble Lord agree that over history printing money has usually, if not always, led to inflation? If he does agree, can he tell your Lordships why quantitative easing will not do so this time?

[Lord Sassoon]

No, my Lords, I certainly will not. It has actually led to inflation already. In the estimates made by the Bank of England in the third quarter bulletin in September last year, it was estimated that quantitative easing had raised UK inflation by around 0.75 to 1.5 per cent. I firmly believe that the greater benefit of raising real GDP by around 1.5 to 2 per cent was what really mattered in the economic circumstances in which we find ourselves. Then the question is what happens to the unwinding of QE? The stock will be held and sold back into the market in due course.