Randeep Ramesh certainly tackles a worthwhile and complex modern economic policy conundrum (Labour could find the money it wants without raising taxes. This is austerity by amnesia, 29 June). But his opinion that the Bank of England should simply hand over the cash proceeds from quantitative tightening (QT) and that central bank independence is somehow partly responsible for Britain’s economic woes, are misguided.
Central bank independence was hard-won and has largely proven a resounding success in the developed world for more than 30 years. Allowing a central bank to hand over substantial moneys from QT revenues to the Treasury would be a recipe for disaster, against the spirit if not the letter of the law, as well as a dangerous precedent.
More broadly, there is merit in Ramesh’s push to coordinate fiscal and monetary policy better. Neither the Treasury nor the Bank are immune to criticism in their failures to act earlier to stave off the inevitable post-Covid inflation spike by raising rates more quickly in late 2021-early 2022, before the Ukraine war. Equally, the Treasury may have acted in a more nuanced fashion in removing the government-led stimulus package.
Kevin Newman
London
• A big thank you to Randeep Ramesh for explaining the implications of quantitative easing (QE) and QT. This insane orthodoxy simply gives public money to banks and the City. In 2007-08, the then Bank governor, Mervyn King, pontificated about “moral hazards” for banks with regard to their risky behaviour, but then it was the public purse that took the hit from the crash and has been picking up the tab ever since. It is a parasitic system geared to the benefit of the City and the oligarchy. Gordon Brown’s granting of independence to the Bank was a mistake, driven by his anxiety to reassure the City that Labour was not a threat. Running the economy is profoundly political and ideological, and the notion that only state technocrats can be trusted with monetary policy is nonsense.
Rachel Reeves is making the same mistake by trying to fit her spending to Office for Budget Responsibility (OBR) predictions. The creation of the OBR was simply a George Osborne wheeze to help justify his disastrous austerity policy, which Reeves is in danger of repeating.
Philip Wood
Kidlington, Oxfordshire
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