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FT Alphaville has written extensively about quantitative easing (and its somewhat opposite quantitative tightening) in the UK.
Behind almost all the coverage of the Bank of England’s massive bond-buying, there’s a mystery: the “compensation process” document that underpins the UK’s extraordinary QE arrangements – in which the Treasury offsets the BoE’s losses. Pays to do. The scheme – to the chagrin of journalists and the House of Lords – was never released.
Today, that has changed: The Treasury has been forced to release the bulk of the document, following Alphaville’s freedom of information request following an order from the Information Commissioner’s Office.
You can read it with edits, Here.
Naturally, our evening plans are now set. While much of this has been said elsewhere, as expected, this is the first time the legal details have been revealed. As the treasure says:
As noted in the ICO’s Notice of Decision, there is already a high level of transparency in relation to the UK’s quantitative easing program and the APF, and the Commissioner believes that the public interest in disclosure is largely based on anecdotal information. It is fulfilled. Published online by HM Treasury, Parliament and other government authorities.
The reforms in place seem to be mostly concerned with the details of the government’s cash handling arrangements. HMT has previously tried to block the document’s release, claiming its release could aid economic crime.
FTAV disagreed, and the ICO (whose decision can be read here ) sided with us regarding publication of most of the document.
HMT Today says:
Certain sections of the Deed of Diminuity have been amended as the release of these sections would reveal operationally sensitive information relating to the government’s cash management practices. The ICO has considered the case and ruled that HM Treasury correctly applied the exemption to part of the information requested because the release was likely to affect the UK’s economic interests. The ICO ruled that the public interest weighed in favor of maintaining the immunity and preventing the release of parts of the deed.
A potentially material element of the document is its flexibility: for example, whether the chancellor will be able to unilaterally abolish compensation.
The answer, it would appear, is no. Both parties will need to agree to a waiver, and nothing in practice will prevent HMT’s liability from existing:
We get a rough timeline of Dead’s development: first agreed in 2009, updated in 2012, 2016 and 2019.
At this point, it’s great to see that even the most economically important documents can have silly typos:
To some extent this is just a small transparency win, but let us know if you see anything interesting there!
Further reading
– The OBR should trust markets on the cost of quantitative tightening.
– Getting information about functional QT and UK financial rules
