Simon Ward: Pay Treasury with cash from QE’s income

Tim Wallace
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BANK bailouts and quantitative easing have both provided the government with a financial boost worth tens of billions of pounds, according to analysis from economist Simon Ward from Henderson Global Investors, published yesterday.

Ward argues the government’s favoured measure – public sector net borrowing (PSNB) excluding financial interventions – gives too gloomy a view of the public finances.

This measure put borrowing at £124.8bn in the calendar year 2011, or 8.3 per cent of GDP.

However, Ward points to the £33.5bn surplus generated by the state owned banks, and from the interest income on the Bank of England’s asset purchase facility, to suggest this paints too grim a picture.

“There is a strong case for the treasury booking the Bank’s net income from quantitative easing through a dividend, rather than allowing it to accumulate off-balance-sheet in the Asset Purchase Facility,” said Ward.

However, this could run into trouble if it was felt to look too much like debt monetisation.