UK Politics

Treasury attempts to boost lending have 'failed', MPs say

Bank of England
Image caption There has been some debate over the effectiveness of the central bank's QE programme

Government attempts to boost lending in the economy have "failed", an influential group of MPs has said.

The Public Accounts Committee said the Treasury had embarked on a "series of expensive experiments indemnified with taxpayers' money".

It also criticised the Treasury's understanding of the Bank of England's quantitative easing programme.

But the department insisted it was focused on ensuring "Britain succeeds in the global race".

The cross-party committee delivered its verdict after examining the department's annual report and accounts for 2011-12.

It comes ahead of the Budget, which will take place on 20 March.

'Poor decision making'

In a report, the committee said: "The lending schemes have failed to significantly increase lending.

"The Treasury has limited understanding of its role in these measures. It has not set out its goals and intended outcomes, and it has limited management information to help it monitor progress."

The committee also expressed concerns that the Treasury was not aware of "either the risks it has taken on by indemnifying the Bank of England against losses on Quantitative Easing or the expected economic benefits".

The committee's chairman, Labour MP Margaret Hodge, said: "Some £375bn has so far been injected into the economy as an 'experiment' but the department could not explain to us what the effect has been on the whole economy or on different parts of society."

She added: "The Treasury's attempts to stimulate economic growth through new lending have, so far, not been successful. The National Loans Guarantee Scheme achieved just 15% of its intended take-up."

MPs also rebuked the department for not getting a grip on spending across Whitehall, and "impenetrable" book-keeping.

"The Treasury acts as both the finance ministry and economic ministry," said Mrs Hodge. "But it appears to neglect its role as finance ministry.

"Its own accounts are impenetrable and this committee keeps seeing instances of poor decision making by departments, which the Treasury could and should have prevented."

Deficit reduction

However, the committee did acknowledge that the Treasury had managed to cut the public purse's exposure to bank guarantee schemes in the wake of the credit crunch, and was doing better at holding on to key staff.

The committee also said the support provided to banks during the credit crunch had helped prevent the banking system from collapsing.

"We are pleased that the Treasury has successfully withdrawn nearly all of the taxpayer guarantees to banks, but the taxpayer still owns some £66bn of shares in RBS and Lloyds, a sum which is yet to be recovered," the MPs said.

A Treasury spokesman said: "The Treasury is focused on its job to support the government's strategy to deal with the country's debts and rebalance the economy to ensure Britain succeeds in the global race.

"Over the past two years over a million private sector jobs have been created, the deficit has been reduced by a quarter and interest rates have been at near record lows, benefiting businesses and families."

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