Andrew Bailey under political attack on all fronts

Core Viewpoint - The article discusses the growing criticism of the Bank of England's approach to managing interest on reserves and the implications of quantitative easing (QE) on public finances, highlighting the urgent need for reform in light of rising government borrowing costs and losses incurred by the Bank. Group 1: Criticism of Current Policies - Louise Haigh calls for a more strategic unwind of QE and criticizes the excessive cash given to commercial banks at taxpayers' expense [1] - Richard Tice highlights that the current approach is leading to tens of billions in losses and urges the Bank to stop selling bonds and reduce interest payments to banks [2][5] - The Bank of England's profits have diminished significantly, with forecasts indicating a potential loss exceeding £130 billion by 2033 [2][3] Group 2: Financial Implications of QE - The QE scheme has created £895 billion in electronic money, leading to annual costs exceeding £20 billion, which is viewed as a catastrophic expense during fiscal constraints [4] - The Treasury is now required to refund the Bank, which initially profited over £120 billion from QE but is now facing substantial losses due to higher interest rates and lower bond prices [3][4] - The current fiscal situation necessitates a reevaluation of the Bank's policies to alleviate pressure on government borrowing costs [8][15] Group 3: Calls for Coordination and Reform - There is a coalition of voices from various political factions urging the Bank to adjust its policies to mitigate financial strain on the government [5][8] - David Aikman suggests that the Treasury and the Bank should coordinate to limit the costs of quantitative tightening (QT) on public finances [14][16] - Proposals include ceasing bond sales and potentially imposing a tax on income from the Bank to generate additional revenue for the government [19][22] Group 4: Future Outlook and Decisions - The Bank is expected to make decisions regarding the pace of QT, with predictions of slowing down active sales to avoid market disruptions [20][21] - Analysts are working on estimates to counter claims that QE has become a financial burden, emphasizing the long-term benefits of lower debt issuance costs [12][18] - The Chancellor's upcoming letter to the Bank may not lead to significant changes in monetary policy, as the MPC retains operational independence [13][23]