Osborne's bank raid reconsidered

Was the "smash and grab" actually so bad?

When Osborne re-arranged the accounts between the Bank of England and the Treasury to put the £37bn profit of the QE programme on the nation's books, it was widely seen as a swindle, with our own David Blanchflower calling it a:

Smash-and-grab raid on the Bank of England to make his borrowing look lower.

But the FT's David Keohane (yes, second time today) wonders if the fading importance of central bank independence means that we should reconsider that assessment. Keohane writes:

We still find it hard to view the “raid” itself in any sort of harsh negative light.

We did and do acknowledge the timing was… awkward… but essentially it’s still accounting — the shifting of figures between a parent and a subsidiary. If anything, the “raid” has made the whole process far more transparent.

More generally, the idea that central bank independence might necessarily be eroded, and that it might be a good thing, was until recently taboo. But it is becoming more and more accepted that a central bank’s status is dependent on the economic realities it exists in.

The two big problems highlighted by Osborne's raid were that it blurred the lines between monetary and fiscal policy, and that it could come back to bite in the future. The former's looking like less of a concern in the current climate, but the latter actually might not be that bad. Even if it has already happened.

Keohane quotes Bank of America Merril Lynch's John Wraith:

As a result of the dramatic spike higher in yields that occurred over the first week or so of the New Year, the mark-to-market value of the BoE’s portfolio of Gilts acquired through QE over the past four years dropped by more than £7bn.

The Treasury/BoE is still earning £1bn a year month of positive carry — the value of holding the bonds — which ought to soften the blow. But ultimately, the fear sparked by an accounting change may prove to have been a storm in a teapot.

The Bank of England. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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As a Conservative MP, I want Parliament to get a proper debate on Brexit

The government should consider a Green Paper before Article 50. 

I am very pleased that the government has listened to the weight of opinion across the House of Commons – and the country – by agreeing to put its plan for Brexit before Parliament and the country for scrutiny before Article 50 is triggered. Such responsiveness will stand the government in good stead. A confrontation with Parliament, especially given the paeans to parliamentary sovereignty we heard from Leave campaigners during the referendum, would have done neither the Brexit process nor British democracy any good.

I support the government’s amendment to Labour’s motion, which commits the House to respecting the will of the British people expressed in the referendum campaign. I accept that result, and now I and other Conservatives who campaigned to Remain are focused on getting the best deal for Britain; a deal which respects the result of the referendum, while keeping Britain close to Europe and within the single market.

The government needs to bring a substantive plan before Parliament, which allows for a proper public and parliamentary debate. For this to happen, the plan provided must be detailed enough for MPs to have a view on its contents, and it must arrive in the House far enough in advance of Article 50 for us to have a proper debate. As five pro-European groups said yesterday, a Green Paper two months before Article 50 is invoked would be a sensible way of doing it. Or, in the words of David Davis just a few days before he was appointed to the Cabinet, a “pre-negotiation white paper” could be used to similar effect.

Clearly there are divisions, both between parties and between Leavers and Remainers, on what the Brexit deal should look like. But I, like other members of the Open Britain campaign and other pro-European Conservatives, have a number of priorities which I believe the government must prioritise in its negotiations.

On the economy, it is vital that the government strives to keep our country fully participating in the single market. Millions of jobs depend on the unfettered trade, free of both tariff and non-tariff barriers, we enjoy with the world’s biggest market. This is absolutely compatible with the result, as senior Leave campaigners such as Daniel Hannan assured voters before the referendum that Brexit would not threaten Britain’s place in the single market. The government must also undertake serious analysis on the consequences of leaving the customs union, and the worrying possibility that the UK could fall out of our participation in the EU’s Free Trade Agreements (FTAs) with non-EU countries like South Korea.

If agreeing a new trading relationship with Europe in just two years appears unachievable, the government must look closely into the possibility of agreeing a transitional arrangement first. Michel Barnier, the European Commission’s chief negotiator, has said this would be possible and the Prime Minister was positive about this idea at the recent CBI Conference. A suitable transitional arrangement would prevent the biggest threat to British business – that of a "cliff edge" that would slap costly tariffs and customs checks on British exports the day after we leave.

Our future close relationship with the EU of course goes beyond economics. We need unprecedentedly close co-operation between the UK and the EU on security and intelligence sharing; openness to talented people from Europe and the world; and continued cooperation on issues like the environment. This must all go hand-in-hand with delivering reforms to immigration that will make the system fairer, many of which can be seen in European countries as diverse as the Netherlands and Switzerland.

This is what I and others will be arguing for in the House of Commons, from now until the day Britain leaves the European Union. A Brexit deal that delivers the result of the referendum while keeping our country prosperous, secure, open and tolerant. I congratulate the government on their decision to involve the House in their plan for Brexit - and look forward to seeing the details. 

Neil Carmichael is the Conservative MP for Stroud and supporter of the Open Britain campaign.