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Bank of England can prevent return to austerity as UK heads for ‘sharp’ recession, Governor claims

Bank of England Governor Andrew Bailey said the UK is making a 'very sharp move into recession' (PA)

2 min read

The Bank of England has bought up £200billion of Government debt as part of plans to help prevent a return to austerity after the coronavirus crisis, according to its Governor.

Andrew Bailey made the claim as he explained why the central bank has taken the sum onto its own balance sheet, saying it is to "spread the cost of this thing to society”.

After stark figures revealed the worst quarter for GDP since the 2008 financial crash, he echoed the comments of the Chancellor Rishi Sunak, who admitted the country is heading into recession.

The bank governor told ITV's Peston: "Well, I think it tends to confirm that we've got a very sharp move into recession and it was quite sudden, which is obviously what we've all observed from the shutting down of the economy so, to be frank, we're not really surprised by that number at all."

After the Office for National Statistics reported the economy shrank by 5.8% in March, and 2% in the first three months of the year overall, talk has turned to how the Government will pay for the increased borrowing caused by the pandemic.

Pressed on the debate over whether a new round of austerity would be needed, Mr Bailey said: "Obviously, it's not for the Bank of England to comment on fiscal policy.

"What I would say is that I think there are choices, and I think those choices will be looked at very seriously.”

He added: "I think one of the reasons that the Bank of England obviously acquiring a much larger stock of government debt than if you go back to the financial crisis of 10 or 12 years ago would have been imagined, is that I think what we can do, providing the overall credibility of the framework remains in place, and independence is very important to that point, is that 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."

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