Note: This draft Bill is written as a piece of legislation, so it is structured accordingly. If you just want to know how the Bill actually works and don’t want to read the legal stuff, read the plain English ‘How It Works‘ instead.
How The Act Is Structured:
The Act is split into the Parts, which specify the main provisions of the Act, and the Schedules, which give greater detail on some of the technicalities that will be necessary for the Act to be successfully implemented.
Introduction & Interpretations
This introduction simply clarifies the aims of the draft legislation and clarifies the meaning of the terms that we use later on (an essential part of any legislation). Read the Introduction & Part 1
Part 2: Creation of Currency
Part 2 specifies that, once the Act is implemented, the Bank of England will be the only institution permitted by law to ‘create money’ or increase the money supply in any way. This ends the state of affairs that has existed for the last few hundred years, whereby the banking sector is permitted to effectively create money (and debt) through the lending process.
The Monetary Policy Committee is given the responsibility of deciding how much new money is required in the economy in any period of time. The MPC is made independent and protected from political control or influence, and can not be directed by either the government or civil servants. It does however become accountable to a cross-party committee of elected representatives who can scrutinize its decisions.
Newly created money is added to central government income, where it can be used to fund tax cuts or new government spending, in accordance with the elected government’s democratic mandate. Read Part 2: Creation of Currency
Part 3: The Universal Principle
This short section simply makes it a legal offence for any institution other than the Bank of England to create money. The Schedules (which come later) specify exactly how the banking system will be prevented from creating money. Read Part 3
Part 4: Establishment & Operation of Accounts
Part 4 describes the accounts that banks will hold at the Bank of England, and the types of account that customers of banks will use. It also specifies an account which the central government will hold with the Bank of England, into which newly created money will be paid. Read Part 4
Part 5: General
This section specifies certain activities that will become criminal offences after the Bill becomes law. It also repeals a section of the Bank of England Act 1998, in order to guarantee that the control of the money supply is completely insulated from political influence. Read Part 5
Part 6: Final
This section specifies the extent to which this Act would apply (England, Scotland, Wales, Northern Ireland, the Channel Islands and the Isle of Man), when it will come into force (one year after being voted into law), and defines the short name of the Act as ‘The Bank of England (Creation of Currency) Act”. Read Part 6
Schedule 1: Establishment Of Universal Principle
This schedule further clarifies that banks will no longer be able to ‘create money’ or increase the money supply through their lending activies (or any other activity), and defines the only exception to this rule as the Bank of England, who will be authorised to create new money under the direction of the Monetary Policy Committee. Read Schedule 1
Schedule 2: Provision of Customer Accounts
This detailed section outlines the two types of accounts that customers of banks will use Read Schedule 2
Schedule 3: Establishment of Three Accounts with Bank of England
This section specifies the three accounts that each bank will hold with the Bank of England. Read Schedule 3
Schedule 4: Funding Loans and Clearing Cheques
This section describes how banks will be able to lend to both customers and other banks. Read Schedule 4
Schedule 5: Establishment of Central Government Account
Schedule 5 sets up the account which the central government will hold with the Bank of England, into which newly created money will be paid before it is distributed into the economy. Read Schedule 5
Schedule 6: Remedies Available to the Bank of England
This final section outlines the course of action available to the Bank of England to deal with a bank which has become temporarily or permanently insolvent. Read Schedule 6
I am very sorry to say this but simply reforming the money system will not solve the problems of the world.
When I first read about fractional reserve lending I too thought it was just a question of changing this system which has become hugely fraudulent.
However when one cosiders energy and ecology as well as the fate of other nations who have been placed in debt serfdom before that arrived upon us (the UK, Canada, Australia, Greece etc) it does become clear that the issues extend way beyond that. Simply “fixing” the monetary system without other considerations may even do more harm than good.
Not least one has to consider the mental “conditionnning” of the vast majority of people and realise the huge wall that you are presented with.
I don’t say that it is hopeless but being realistic it is not far from being the case.
Please feel free to contact me and I will give you some preliminary source material before releasing further “late breaking” material.
Hi Cyril, thanks for your comment,
We aren’t claiming to be able to solve every problem in the world, ultimately, energy and ecology are completely different topics, and crucially, opinion varies on the most ethical way to deal with these issues. Our reform covers a systemic problem with our banking and monetary system. Whatever your political opinions are, the problems dealt with by our reform will benefit you, should we adopt it. New methods of dealing with the energy and ecological problems we face would be easier to deal with if our government had an extra £200bn to spend on dealing with them annually, and this is our sole focus, it is up to the government, and hence, you, the voter, to decide what to do with it once we have reform.
Au contraire, both,
The debt based money system is a key driver of the destructive development that is at the heart of the ecological crisis we face. With a reformed financial system we would not be committed to forced economic growth. If you “solve” the energy problems without tackling the financial system we would be back to a new set of economic growth driven crises in no time at all, as shown by the limits to growth studies.
[...] som kommer med lösningar för en ny tid! http://www.bankofenglandact.co.uk – [...]
[...] Proposed Bank of England Act [...]
I would like to know what consequence this act would have on LETs schemes, transition towns initiatives such as local currencies eg. http://www.thelewespound.org/
?
Hi Jolie,
This act would have no impact on LETs at all. We have explicitly stated that local or alternative currencies are not prohibited or affected by the Act in Section 2 (7). For transition towns, the wider effects of the Act are likely to help the movement – by lowering the overall debt burden of society and the knock-on effects that this will have on the economy.
Dear Sirs,
The proposed Act is a praiseworthy step in the right direction, but the leg is still in mid-air. Please take into account:
1. The Universal Principle will be flouted at once by hoarding, against which there is neither provision nor sanctions.
2. The reason behind it lies in the nature of money itself, with its incorporated contradiction store of value + means of exchange in both cash and in credit.
3. The parasitic nature of the store of value function is responsible for usury, which is the tribute that those who need means of exchange must pay to those who hoard store of value.
4. Hence the unnecessary plethora of rules, regulations, punitive measures, restrictions etc. that are rife in the text and appendices of the proposed Act.
5. The banks at present control 97.5% of money because they control credit, and they issue credit mostly in the interests of speculation and not of the economy of production.
6. The act does not address the existing imbalance between the 97.5% credit, inaccessible to most and available to a few, and the remaining 2.5% cash, inaccessible to all because of its scarcity.
7. To complete the stride and put the leg firmly on the ground, the contradiction store of value/means of exchange must be eliminated. This can be done by adopting a type of money functioning exclusively as means of exchange, with zero store of value.
8. The mechanism was suggested by Silvio Gesell (1862-1930) more than 100 years ago: every note issued by the BoE is to have a date of issue and one of expiry one year apart, to be kept in circulation by paying a modest 0.5% per month on the nominal value, and exchangeable for a new one at expiry.
9. The alternative is therefore between lending at 0% interest versus hoarding at -6%. The increase in circulation would render unnecessary most of the measures contemplated in the present form of the Act, give a huge push to the economy of production, render ‘funds’ and other forms of stagnation redundant, and punish wrongdoers without having to resort to armies of assorted bureaucrats.
I remain at the disposal of anyone interested in the matter.
Silvano Borruso
Dear Silvano,
Note that ‘hoarding’ would practically mean keeping your money in a Transaction Account, on which you would need to pay account fees (so you would in effect receive a negative interest rate). That should be an incentive for the vast majority of people who have more money than they need to put some into an Investment Account so it can be used for productive investment. No-one with significant amounts of money will hold them in a Transaction Account when they could be investing them for a return. So the issue of hoarding shouldn’t be a problem.
A simple idea – so simple, that it won’t work. While it may be possible to regulate and control the official currency and money in circulation, all that will happen is that different forms of money will be created.
Money is a means of exchange. New forms of exchange will arise in the same way as, for instance, cigarettes can become currency in prison populations.
If a business cannot borrow the official currency from a commercial bank to pay a supplier, it will issue an IOU (perhaps backed up by an accountant’s/bank’s statement that the business is good for the money).
The supplier can then endorse the IOU to pay its own suppliers and so on. Eventually you will have these IOUs circulating around the economy without any bank having to create any money whatsoever. Perhaps these IOUs will have the words “I promise to pay the bearer……”
Oh, by the way, the scenario outlined above happened in the 1970s when the then government attempted to restrict money supply growth through the “corset”.
Of course, your proposed Bill (please note until it receives Royal Assent it should be referred to as a Bill not an Act) does have criminal sanctions for those who are supposedly “counterfeiting” money in this way, but no doubt this will give lawyers plenty of business as they devise forms of IOU that don’t fall foul of the law – or at least provide sufficient “reasonable doubt” as to whether the business has created money or not (or will you also propose the abandonment of the basic standards of proof required for a criminal offence).
It’s a simple idea, but not one that has much legs I’m afraid….
Hi The Critic, thanks for your comment.
This happens already, the business I work in, for example, gives customers credit accounts, on 30 day terms, an IOU, so to speak, we then produce the goods, bought from our supplier, on credit, and take payment 30 days after delivery of the goods, and then make payment 60 days after the order was placed with our supplier. We often assume that our clients also give credit accounts, but payments do need to be made, the chain has an end on both the supplier and consumer side, and the money passes through the chain upon the end of the credit period. Different entities have different credit ratings, money, as you say, is a means of exchange, IOU’s are another medium of exchange, but there is a reason why money still exists, it is universally acceptable legal tender, it is an IOU that has been paid, IOU’s rely on their reliability (or their backing from a factoring company)
We don’t plan to criminalise credit accounts, only the creation of money through fractional reserve banking.
In the same way that businesses use money, and give each other credit accounts today, they will continue to do so after our reform is implemented, yet the need to do so will be reduced in line with the reduction of debt in the economy, simply put, the money will be there to pay for goods and services.
Hi, awesome work. Can I ask how is this being received by government? Are they truly open to constructive reform or just going through the motions of listening to people whilst the bankers continue to pull the strings? Will we ever get a decent fiscal system? Lot of questions I know but something has to change and just concerned the government will continue on its present path without ever really acting and changing things
Thanks.
Hi Cole,
We are meeting the MP for Bristol West, Stephen Williams (LibDem) to discuss the reform next month, Stephen has offered to write to Mr Osbourne and Mr Cable on our behalf, which in our opinion can be construed as a tentative gesture of support, at the very least, a written letter to one MP from another must elicit a response from the recipient. I can understand your scepticism about the government taking action, but this is why we need campaigns like ours, we need to force their hand. Imagine yourself in government, considering whether to make one of the biggest reforms since we have had elected officials, you’d certainly want to know you had the backing of the people before proposing it. Our reform will enable any government to effectively manage the country, look out for its citizens, and make real, positive changes, they are at the mercy of the debt-based monetary system every bit as much as we are. If governments understand our reform, and have our backing, there would be no reason to resist it!
The Goverment has asked for ideas on savings but will they embrace these ideas ..can we approach every Lib Dem minister the key to unlocking any Tory resistance is the lightlyhood of losing the alliance support if you have a large percentage of Lib Dems with you it could start carry the day the grass roots of the Lid Dems are not happy with proposed cuts and the real hardship it will inflict on pensioners who rely on state benefits well done all of you it is so refreshing to see a group people thinking out of the box
‘If governments understand our reform, and have our backing, there would be no reason to resist it!’
I disagree. As Michael Rowbotham points out in ‘Grip of Death’, governments can find that having a deficit can be of benefit in pushing through their policies.
I recall Thatcher justifying the privatization of industry on economic grounds. The state supposedly couldn’t afford to keep subisidising inefficient industry as their wasn’t enough money. One of her conference speeches including telling the delegates that it was their money that the state was wasting.
Although some money reformers argue that reforming the money supply is not political, I think it is highly political. Giving the state owned Bank of England the sole power to create money is hardly the philosophy of a party that believes in ‘free market’ economics, but more akin to a party that believes the state should intervene in the economy and even take control of the economy.
I agree with the proposed Bank of England Act, but it make take the election of a more Social Democratic government to get it in the statute book.
Hi Stuart,
I think we may have to agree to disagree in this instance. we believe that £200bn a year extra spending will always be of greater benefit to enacting policy targets than running a deficit. Political commentators and voters know that deficits are unsustainable, but unfortunately neccesary in a debt based monetary system. The cycle of crash and boom becomes more and more exaggerated, with longer crashes and shorter and less beneficial booms, the interest on the national debt soars, (we have calculated that by 2015 that each member of the UK electorate will be paying £129 monthly on national debt interest alone).
Eventually we will no longer have an option – money creation will be handed back to the state, it is only a question of when. We would also say that state-created money is far closer to a free market than the current system, whereby the banking sector has a total monopoly on money creation, and the state effectively subsidises banking by allowing them to create and collect interest on the entire money supply. Monopolies and subsidies are certainly not the free market.
I agree with what Stuart say’s any political party that agree’s with a financial market regulating itself it is itself is a licence in a so called “free market economy” to make as much money anyway it can as we have just seen in the last few years but with the HSBC figures out today it is business as usual..there are to many fat cats out there that control politicians….I am afraid it is political reform as well as banking reform and you will not get this from the Tories or the coalition you will be wasting your breath
I just want to clarify my position i strongly believe you are 100% correct in your proposals but to have these reforms adopted you all will have to be become a lot more hard nosed about it there are too many very rich and influential people out there that will not give up their wealth for the common good even when the ship is sinking underneath them they will clutch on to there wealth hoping it will keep them afloat and they will fight to the last to keep there way of life.but i wish you well
Sorry but that is naive. The City were the main bankrollers of the Tory election campaign, were they not? They are the ones who benefit from the current system – the rentier class, who do not have to produce anything but simply cream off interest from those who do. Why should the Tories kick against their own tribe and backers? Rather more likely is that the system will have to crash further before sensible ideas like yours get a chance to take centre stage.
We’ve been through all this debate before – Abraham Lincoln, Irving Fisher, JFK, CH Douglas, even it is rumoured Sir Josiah Stamp, all have demonstrated the case for debt free money. The protagonists were either ignored or, conspiracy theorists say, assassinated!
Nick
It is backing up what Cole has said..will this Tory goverment listen they seem hell bent on pushing thess cuts through every statement minsters seem to add ” we be left this mess by the last goverment” and that is not tecnically true it has been a number of goverments of all hues that have contrubuted to this ..what i am saying is politcal doctrine going to overide your common sense approach to our problems…Mike Crees
Hi all i’ve been reading through some of this site but not all so I don’t want to pass judgement yet although it looks positive.
I’m not an economist lawyer banker or mathematition but one thing I do know is that creating money out of thin air and lending it at interest is not right.
We need a real physical economy not just service or fake jobs which we have been cleverly moved on to by the bankers.
We need to control our own money supply for the creation of real sustainable jobs whilst growing our own food and only importing what we need.
Infrastructure is a must but only to facillitate a real economy.
Our currency should be fixed in agreement with other countries and not prone to international speculation and manipulation affecting our imports and exports.
Goods and services that are essential need to be regulated properly for the good of the people and again not open to speculation by the bankers.
We need to put tarriffs on imports so that as an independant nation we are not dependant on any other country.
We have the technology to live the way we want but in balance with natural principles. This doesn’t mean mud huts and compost loos.
For example hydrogen and solar power.
The only thing holding us back is the corpratocracy that is starting to enslave the world for profits and ever more control.
Finally we need a money supply system that is easy to understand with less of the jargon.
Who do we owe the national debt to?? Bank of England??? Well then aren’t we paying the money back to ourselves???
If we don’t owe the money to the bank of England then the national debt must be owed to the banks right???
Well if thats the case didn’t we just bail them out by around 400 billion???
Questions need to be answered!
Regards
Dan
@Dan – around 40% of the national debt is owed to UK pension funds. This opens up another issue (that hasn’t been discussed by the media yet). As the demographics of the population change and the proportion of pensioners increases relative to the proportion of workers, workers will need to be taxed to pay both the state pension (which simply redistributes money from workers to pensioners), but also to repay an increasing proportion of the national debt in order to allow private pension funds to pay their pension holders. So in effect, the state will be paying both state pensions and a large proportion of private pensions. This issue needs further analysis, but it’s safe to say there’s another black hole opening up in public sector finances and that hole will be impossible to fill under the current method of creating money.
The government should control the minting and flow of money, not the B of England watched over by the government. The people in control of the currency must be directly accountable to the citizens so that should the people become discontent with the management, they can vote the civil servants OUT.
Hi Helvena,
In our reform we have put measures in place to avoid the “Zimbabwe” effect from happening, that is avoiding hyperinflation through excessive printing of money that ruined the economies of the Weimar Republic and more recently Zimbabwe. The government will still decide how to spend the money, but will be prevented from printing too much and damaging the economy. The people in control of what to do with the currency will be accountable, and they will control the flow of it, but having those same people deciding how much to create is a dangerous situation that must be avoided, as history has shown us.
Bingo AND Eureka – I have finally discovered an organisation in Europe who completely understands how financial parasites have been feeding off our hard work.
For those who would like to see what Ben et al are proposing in graphic form – I recommend this Canadian website – their explanation is brilliant – they have managed to interview various former Canadian MPs and even a prime minister.
It shows just how deep the fraudulent cancer has spread throughout the ruling elite.
http://www.youtube.com/user/OhNoCanada?blend=2&ob=1#p/a/111862016CF39978/0/eVBDwAuCdPw
For those critical of this reform, isn’t it better to change the current hopeless recipe for serfdom into something much better? Perhaps being more pro-active by lobbying your own MP for change?
Well done Ben and the rest of the team.
Ben..how are you progessing with the reform have you had any meetings with any senior coalition ministers yet ? …if so how have your proposals been recieved…
The campaign is still in the pre launch stages at the moment, we will be updating the website, naming our supporters, in due course.
Well done for doing something proactive – maybe the argument/proposals need some fine tuning but these issues must not be allowed to drop off government agendas.