Advertisement

Bank of England's Andrew Bailey explains how he is helping the government avoid austerity

Governor of Bank of England Andrew Bailey sat down for an interview with ITV News Political Editor Robert Peston. Credit: Peston

Governor of the Bank of England Andrew Bailey has told ITV's Peston show that one of the main purposes of the Bank buying £200bn of government debt - and probably more over the course of the Covid-19 crisis - is to "spread the cost of this thing to society" and help the government avoid a return to austerity.

ITV News Political Editor Robert Peston asked Bailey if the government would have to return to austerity and make spending cuts because of the hundreds of billions of debts being accumulated by the Treasury through its many schemes to limit the harm to our prosperity of the coronavirus epidemic.

Bailey told Peston: "There are choices, and I hope those choices will be looked at very seriously.

"I think, one of the reasons that the Bank of England [which is] obviously acquiring a much larger stock of Government debt than [in] the financial crisis of 10, 12 years ago would have been imagined is what we can do, providing, you know, the overall credibility of the framework remains in place, and the independence of the Bank is very important to that point...

"We can help to spread, over time, the cost of this thing to society, and that to me is important. We have choices there and we need to exercise those choices".

It is very unusual for a central bank governor like Bailey to disclose that it is purchasing the debts of the government to - in effect - bail out the government in a borrowing and spending crisis.

In the interview, which can be watched in full on the Peston show at 10.45, Bailey also signalled the Bank is likely to increase its new purchases of government debt above the £200bn currently promised.

He said he and is colleagues on the Monetary Policy Committee recently agreed to keep open the option of buying more, but the majority did not want to put a number on the precise amount of new money that would have to be created to buy this debt.

Andrew Bailey (R) replaced Mark Carney (L) in March. Credit: PA

Mr Bailey took over from the previous governor of the Bank of England, Mark Carney, in mid-March after being appointed as his successor in December 2019.

Peston's full interview with Andrew Bailey will air in full on ITV at 10:45pm Wednesday night.