Bank of England officials were excluded from discussions ahead of the mini-budget last month that triggered a “full-scale liquidation event” for pension funds, MPs heard on Wednesday.
Deputy governor Sir Jon Cunliffe, who said the central bank was forced into battle to save the £1.5tn pensions industry from insolvency, also warned ministers against grabbing fresh powers to meddle in the decisions of regulators or risk a further deterioration in the UK’s international reputation.
Cunliffe, who has responsibility for the UK’s financial stability, said the central bank was usually briefed confidentially by the Treasury ahead of a budget to allow officials to include the impact of public spending announcements in monetary policy.
However, on this occasion, the Bank’s financial policy committee was blindsided and members of the nine-strong monetary policy committee (MPC) were unable to consider how £45bn of unfunded tax cuts would affect the economic outlook and financial markets.
He said: “Like others, we knew there was a fiscal event and we knew some of the things that would be in it because it was very public and in the Conservative leadership campaign.
“But some things were a surprise on the day, to us as to others,” he added. “We did not have a full briefing of the package the night before.”
He told the all-party Treasury committee that the Bank would have advised the government if it knew there would be such a dramatic knock-on effect on market stability.
“Had they asked us what the market reaction would be, we would have interacted with them,” he said.
Cunliffe said the MPC would usually be handed a report by the Treasury’s independent forecaster, the Office for Budget Responsibility (OBR), before making decisions about
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