By Alistair McConnachie
We are clear that the money-creation decision has to be separated from the money-spending decision.
We cannot have politicians being able to create money and spend it, since they will use it to enhance their electoral prospects.
Similarly we cannot trust the corporate banking sector to create money when it can abuse this power to maximise its own profits.
Instead, the proposal in the Bank of England (Creation of Currency) Bill vests the money-creation power in the hands of a transparent and democratically accountable arm of the Bank of England – the Monetary Policy Committee (MPC).
Some people object, and say that “we cannot trust the Bank of England”, or “the MPC will abuse this power” or they will ask “what makes you think the MPC will be any better than the banks?” These people appear to imagine that the MPC would be composed of people out to “make a quick buck.”
Others say that the proposal would “centralise power” in the Bank.
How to Answer these Objections
Let’s consider some philosophy.
We don’t take the view that people are basically bad. We take the view that people are basically good. This is not “naive” – something of which we have also been accused! It is simply being reasonable.
We don’t have any reason to suspect that people will abuse their powers, but if they do, we expect that they will pay the consequences.
In that regard, there are 4 watertight safeguards for our proposal.
1. The MPC shall be Subject to the Law
The new power of money creation, which the MPC will acquire, is hedged within strong legal boundaries. Step outside these and there will be penalties. The Bill ensures:
- A requirement for the MPC to be “politically independent and neutral” [Section 5].
- A prohibition on the Chancellor, Treasury representatives and any Ministers of the Crown taking any part in the calculation of the Committee [Section 5(2)(e)].
- A requirement for the MPC to be independent from, and neutral towards, commercial interests [Section 6].
- Everyone to be prohibited from attempting to exercise undue influence upon the MPC [Section 7].
- The MPC to be subject to a disclosure regime [Section 8] including a positive obligation upon every member of the MPC to disclose relevant personal and financial interests [Section 8(3)], and a positive obligation upon the MPC to reveal any possible breaches of Section 6 and 7 [Section 8(4)].
- A restrictive covenant prohibiting a member of the MPC holding shares or sitting on the Board of Directors of any organisation carrying on regulated activities as defined by the Financial Services and Markets Act 2000, during his or her term of employment. This covenant shall last for a further 3 years after leaving the MPC, and is in accord with recognised UK employment law [Section 9].
2. The MPC shall be Subject to Parliamentary Scrutiny
- The MPC shall be subject to cross-party scrutiny by our democratically-elected politicians, who will exercise oversight on our behalf under powers vested in Section 10.
3. The Appointments Process to the MPC and the BoE Court of Directors shall be Transparent and Democratically Accountable
- For the first time, the power to appoint members of the MPC is separated between the Bank and the cross-party group [Sections 11, 12 and 13], with the ultimate decision in the case of an internal appointment resting with the House of Commons when appropriate [Section 12].
- For the first time, the power to re-appoint, and remove members of the MPC is separated between the Bank and the cross-party group, with the ultimate decision resting with the House of Commons when appropriate [Sections 14 and 15]. Thus, the appointment, re-appointment, and removal of members of the MPC will be fully transparent, democratic and accountable to the public via Parliament. This is the first time these processes have been put on a clear statutory footing.
- For the first time, the power to appoint a Director of the Bank of England, including the Governor and Deputy Governors, is separated between the Prime Minister and the cross-party group [Section 16].
- For the first time, the power to re-appoint, and remove a Director of the Bank of England, including the Governor and Deputy Governors, is separated between the Bank and the cross-party group, with the ultimate decision resting with the House of Commons when appropriate [Sections 17 and 18]. Again, this means that the appointment, re-appointment, and removal of Directors will be fully transparent, democratic and accountable to the public via Parliament. These processes are no longer opaque but are put on a statutory footing which is transparent for all to see and understand.
4. The BoE shall be Subject to Media Scrutiny, as usual
- In any democratic society, the “fourth estate”, the mass media, plays a very valuable role in holding people to account and acting as a brake on wrongdoing. In Britain we have a politically diverse media, and many journalists and editors are, of course, only too willing to expose foul play. We can be certain that the media will sniff out anything untoward.
Subject to the law, subject to Parliamentary scrutiny, subject to media scrutiny, and with an appointments process which is transparent and democratically accountable – if people cannot accept that these 4 conditions are more than sufficient to safeguard against wrongdoing, and to avoid undemocratic centralisation of power, then they need to be asked, “Seriously then, what do you propose?”
Often their responses will dissolve into vague ramblings about “revolution” or “consciousness change” or unfocused meanderings about “giving power back to the people”.
None of these abstract concepts, or sloppy thoughts, brings anything of value to the table around which we are trying to effect practical change in the here and now.
Hard copies of the 60-page, proposed Bank of England (Creation of Currency) Bill can be purchased for £10 payable to “Prosperity”, at 268 Bath Street, Glasgow, G2 4JR. It can also be purchased online via PayPal at Prosperity Publications for Sale.