Quantitative Easing

Mark Field Excerpts

Thursday 15th September 2016 Commons Chamber

[Ian Blackford]

My contention would be that we have actually had very limited reporting from the Bank of England on the actual effect of the QE programme, and we need a much more detailed analysis. I accept, of course, that there would have been some limited impact on the economy from the QE programme. I will go on to discuss whether we need to balance some of these monetary measures by taking additional fiscal measures, which may have done more to boost sustainable economic growth. That marriage of our responsibilities for monetary and fiscal policies has to be relevant to the point the hon. Gentleman made.

As the Prime Minister herself said:

“Monetary policy—in the form of super-low interest rates and quantitative easing—has helped those on the property ladder at the expense of those who can’t afford to own their own home.”

On this occasion, I agree with the Prime Minister—I do not intend to make a habit of that though.

There has to be a policy response from the Government that recognises that fiscal measures must be taken as part of a balanced approach to deliver the circumstances of sustainable growth. If we look at the growth in financial wealth, we can see the contrasting experience of those who have benefited from this wealth effect at a time that real wage growth has stagnated. We know from an analysis published by the Bank of England in 2013 that QE had boosted asset prices and that the top 5% of households owned 40% of those assets. The analysis from the Bank of England at that time estimated that the top 5% of households had become richer to the tune of £128,000 on average. QE has demonstrably exacerbated wealth disparity between rich and poor.

[Mark Field (Cities of London and Westminster) (Con)]

I would have to agree with elements of what the hon. Gentleman is saying. We have had these ultra-low interest rates and quantitative easing in place for a hell of a long time, and they have had a distorting effect along the lines that he has suggested. Does he not recognise, though, that when, in March 2009, we entered a phase of emergency interest rates and started down the road to quantitative easing, no one would have envisaged that this far down the line the British economy—indeed, more importantly, the world economy and the European economy—would be in such a state that it would be difficult for us to raise interest rates? In other words, the policy in 2009 and for the next year or two afterwards was entirely acceptable and understandable, but it was not envisaged that it would carry on for so long.