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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Sadiq Khan to be elected mayor of London

The MP for Tooting will reclaim City Hall for Labour after eight years.

Sadiq Khan is to be elected mayor of London. Though results are still coming through, it is now mathematically impossible for anyone else to win. The Tooting MP has won City Hall back for Labour after eight years of Conservative rule.

At the time of writing, Khan is beating the Conservative candidate Zac Goldsmith, at 45.5 per cent to 33.9 per cent, in what could be described as a landslide victory. The Green candidate Sian Berry is third with 6 per cent of the vote, followed by the Lib Dems (4.4 per cent) and Ukip (3.5 per cent). Turnout has been higher than expected, at 44.8 per cent – the highest turnout in a London mayoral election since Boris Johnson won in 2008, when it was 45 per cent (in 2012, it was 38 per cent).

The first MP of Islamic faith ever elected in London, Khan was also the first Asian and Muslim to attend cabinet meetings, after being appointed transport minister in Gordon Brown’s government in 2009. He has represented Tooting since 2005. There will be a by-election in the constituency as Khan stands down as MP.

Khan’s thumping victory is a boost for Jeremy Corbyn and the Labour leadership, after a night of disappointing local election results, and coming third in Holyrood. At the time of writing, Labour has kept the same share of seats in the London Assembly.

The result is a disaster for Goldsmith, whose campaign came under constant criticism for its scare tactics regarding Khan as a Muslim of Pakistani heritage. The Conservatives accused Khan of “pandering to extremists”.

Andrew Boff, the Conservative group leader on the Greater London assembly, called the campaign’s attempts to link Khan to Islamic extremism “outrageous” , and the outgoing Tory deputy mayor of London, Roger Evans, said it was a “foolish” campaign, which could “leave a negative legacy” for the Conservatives in London.

The result will come as a relief to pollsters, however, who were predicting at least a 12-point lead for Khan.

Anoosh Chakelian is deputy web editor at the New Statesman.