@PositiveMoneyUK reply from my MP to the query on the money debate

Thank you for contacting me recently about money creation, banking and the Positive Money campaign.

I know the Positive Money campaign has been raising important issues about how we ensure financial stability and gain a greater understanding of money supply in the UK and, indeed most other developed countries, following the global financial crisis.

As you know, there was a debate on this issue in the House of Commons on 20th November, which provided a welcome opportunity to debate money generation and consider how we can improve our banking and financial stability so they better serve consumers.

I believe we need a more transparent and accountable commercial banking sector which works for the whole economy if Britain is to earn our way out of the cost of living crisis. I also believe, though, that the Government have not taken sufficient action to deliver a competitive banking system which serves the interests of consumers or the needs of businesses and the British economy. It is particularly disappointing that the Government have not done more to implement the recommendations of the independent Vickers commission on banking or to help rebuild consumer trust in the sector.

In my view, instability in the money supply is less related to the existence of bank credit and more an issue of incentives to ensure that loans and debts are repaid and only granted when there is a strong likelihood of repayment. If the money supply expands so quickly that doubts exist about the viable repayment of that credit then real risks emerge.

That is why I strongly believe that the banks need to be tightly regulated both in terms of the constraints placed upon their leverage ratio and the core capital that they are required to hold in the first place.

As you may be aware, these issues were debated in Parliament during the consideration of the Financial Services (Banking Reform) Act 2013. during which the Opposition frontbench proposed a number of amendments including for a leverage target to be set by the Treasury and ahead of 2018.

Unfortunately the Government rejected this amendment.

I accept that the main points you raise in your letter are broadly correct but cannot agree with all of the points made by the Positive Money campaign. I do, however, welcome that such fundamental questions are being asked about how the money in our economy is being created and used. how our financial system can be more transparent and accountable and work for the benefit of the country as a whole.

Thank you again for writing to me. I will of course keep your views in mind as the issues around our banks and financial institutions continue to be raised in Parliament.


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