Bank of England 'failing climate' with Covid-19 stimulus programme


The Bank of England has been accused of failing to live up to its tough talk on the climate crisis after it revealed it would buy debt from oil companies as part of its coronavirus stimulus programme.

The oil firms BP, Royal Dutch Shell and Total are among the companies whose subsidiaries’ debts are eligible for the Bank’s bond purchases, according to an indicative list published on its website this week.

The bond purchases, known as quantitative easing, are being made to stimulate the broader economy during the pandemic lockdown. The monetary policy committee (MPC) at Threadneedle Street hopes purchases of £200bn in government and corporate bonds from banks will encourage those institutions to lend the proceeds elsewhere in the UK economy, while also holding down borrowing costs for companies.

However, activists said the continued inclusion of some of the biggest polluters in history was incompatible with the government’s aim of net zero carbon emissions by 2050.

Positive Money, a campaign group, said the purchases of oil company bonds broke the promises of Andrew Bailey, the new Bank of England governor, who last month told MPs there was a “very strong argument” for excluding fossil fuel companies from the purchases.

Bailey said looking at the exclusion of fossil fuel companies would be a priority for the Bank, but noted any exclusion would require the consent of the government.

Andrew Bailey said there was a ‘very strong argument’ for excluding fossil fuel companies from bond purchases.

Fran Boait, the executive director of Positive Money, said the Bank must stop buying bonds from fossil fuel companies and consider excluding firms whose business models were not in line with the Paris climate agreement and the government’s 2050 net zero target.

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“Corporate QE is another subsidy for multinational companies and is not necessary to save the economy or save lives,” she said. “There is no need for our response to the coronavirus crisis to harm our response to the climate crisis.”

Income subsidies

Direct cash grants for self-employed people, worth 80% of average profits, up to £2,500 a month. There are similar wage subsidies for employees.

Loan guarantees for business

Government to back £330bn of loans to support businesses through a Bank of England scheme for big firms. There are loans of up to £5m with no interest for six months for smaller companies.

Business rates

Taxes levied on commercial premises will be abolished this year for all retailers, leisure outlets and hospitality sector firms.

Cash grants

Britain’s smallest 700,000 businesses eligible for cash grants of £10,000. Small retailers, leisure and hospitality firms can get bigger grants of £25,000.

Benefits

Government to increase value of universal credit and tax credits by £1,000 a year, as well as widening eligibility for these benefits.

Sick pay

Statutory sick pay to be made available from day one, rather than day four, of absence from work, although ministers have been criticised for not increasing the level of sick pay above £94.25 a week. Small firms can claim for state refunds on sick pay bills.

Other

Local authorities to get a £500m hardship fund to provide people with council tax payment relief.

Mortgage and rental holidays available for up to three months.

A Bank spokeswoman said: “The MPC’s actions are guided by statutory objectives and a remit set by parliament and the government of the day. These objectives are for the economy as a whole and are not specific to particular sectors. The government’s latest remit letter does not specify a climate objective.”

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Boait said the scheme’s remit was set in August 2016, after the Brexit referendum, with “no tilt to or away from specific sectors”.

Of the £10bn corporate bonds the Bank intends to buy in the latest round of QE, £300m worth, or 3% of the total, were issued by companies involved in energy extraction, the Bank spokeswoman said.



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