The magic money tree – what can possibly go wrong?

After every Budget, big or small, Tory backbenchers usually meet with the Chancellor. But on the evening of Rishi Sunak’s mini-Budget this week, they had already scheduled in a meeting with Andrew Bailey, the new governor of the Bank of England. This was extraordinary. Since when does the governor talk to MPs? Or risk upstaging the Chancellor? Worse still, the Treasury had not been told about the governor’s new gig. When the news was broken (by Katy Balls on The Spectator’s website), phone calls were made and the Bailey address was rescheduled. Natural order was restored — for the time being, at least.

But had the governor appeared, the Tories would have had plenty to ask. It has not escaped their attention that the UK government is being kept financially afloat through money printed by the Bank of England. The sums are vast: a deficit of £300 billion this year, made possible by £200 billion of quantitative easing. To put that in perspective, another £5 million will have been borrowed by the time you finish reading this article. In Wednesday’s summer statement, Sunak added another £30 billion, suggesting in the ‘medium term’ the Treasury would figure out how to pay for his jobs and stimulus schemes – but there was no real indication as to when that might be. Right now the pressure is off. The Bank is facilitating a money circle for the government: printing the money it wants to spend, then mopping up the debt it leaves behind. This creates an artificial market, keeping borrowing rates deceptively low. But how long will it last? When might Bailey cut off this supply of cash? How long can we keep getting something for nothing?

Boris Johnson was elected after saying that the austerity of the David Cameron years had been a mistake.