Money Creation Debated in UK Parliament.

On the 20th November 2014 UK Parliament held a back bench debate on “Money Creation and Society”. This marked the first time in 170 years,  since the Bank Charter Act in 1844, that the topic has been fully debated in Parliament. Thank you to all of your who contacted your MP and helped to make the debate a success.

Over 35 MPs attended and 21 MPs spoke throughout the debate. This included: Steve Baker MP, Michael Meacher MP, Peter Lilley MP, Austin Mitchell MP, Zac Goldsmith MP, Catherine McKinnell MP (shadow front bench) and Andrea Leadsom MP (from the government).

The debate is an important step. Members of Parliament at the debate acknowledged that banks create new money when they make a loan and there was a consensus amongst most MPs present that this is a problem.

The aim of this debate was not to take a vote or change laws, however, it provided an unprecedented opportunity to discuss this topic, which is outside of the government’s agenda. We were overwhelmed by the quality of the discussion and the cross-party nature of the debate.

The government’s view on this debate was provided by Andrea Leadsom MP, the Economic Secretary to the Treasury. She raised seven ‘important questions’. We have written a detailed response and addressed them all – you can read it here.

Perhaps most importantly, cross-party support came for a proposal to set up a monetary commission in order to explore this issue in detail.

Steve Baker MP stated: ‘We are in a debt crisis of historic proportions because for far too long profit-maximising banks have been lending money into existence as debt with too few effective restraints on their conduct and all the risks of doing so forced on the taxpayer by the power of the state.’
‘Money is not neutral. It redistributes real income from later to earlier owners—that is, from the poor to the rich, on the whole. That distribution effect is key to understanding the effect of new money on society. It is the primary cause of almost all conflicts revolving around the production of money and around the relations between creditors and debtors.’

Austin Mitchell MP stated that ‘This House and the Government are obsessed with money and the economy, but we never debate the creation of money or credit, and we should, because, when it comes to our present economic situation and the way the banks and the economy are run, that is the elephant in the room. It is time to think not outside the box, but outside the banks; it is time to think about the creation of credit and money.’
There were no front benchers engaged in the debate, apart from the 2 representatives that had to give responses. To engage publicly in this debate would be to engage with the underlying problems of our economic system, and current fiscal and monetary policy. That is not a step any of the mainstream parties are willing to take yet.

Micheal Meacher MP laid out his full support of the creation of a ‘sovereign money system’ explaining how putting the power to create money back in the public interest would address 5 points: ending too big to fail, increasing economic stability, lending to productive investment, damping house price bubbles and reducing wealth inequality, and finally redressing the democratic deficit of the current banking system. \
He finished his speech by calling on the Government to set up a commission on money and credit, with particular reference to the potential benefits of sovereign money.

Establishing a commission to look into money and credit was supported by Zac Goldsmith. Andrea Leadsom, the Economic Secretary to the Treasury, suggested that the Treasury Select Committee (TSC) could look into this. The Positive Money team will be pushing for this with TSC members to ask them about their support for a commission. The news that Andy Haldane, the chief economist at the Bank of England, will be commissioning heterodox economics research was praised during the debate.

Positive Money Organization

www(dot)positivemoney(dot)org