{"id":771208,"date":"2026-09-15T07:28:12","date_gmt":"2026-09-15T07:28:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/771208\/"},"modified":"2026-09-15T07:28:12","modified_gmt":"2026-09-15T07:28:12","slug":"bank-of-england-urged-to-slow-or-halt-bond-selling-to-slash-uk-borrowing-costs-economics","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/771208\/","title":{"rendered":"Bank of England urged to slow or halt bond-selling to slash UK borrowing costs | Economics"},"content":{"rendered":"

Economists have urged the chancellor, John Healey, to press the Bank of England<\/a> to slow down its bond-selling programme that has already cost the exchequer billions of pounds.<\/p>\n

The Bank\u2019s monetary policy committee (MPC) meets this week to not only decide the level of interest rates<\/a> but also whether they should freeze or slow the sale of government bonds, known as gilts, bought as part of the rescue operation after the 2008 banking crash.<\/p>\n

That process was known as \u201cquantitative easing\u201d (QE), and over the past four years the Bank has been reversing it through \u201cquantitative tightening\u201d<\/a> (QT) \u2013 selling the debt back to the market \u2013 to help reduce inflationary pressures.<\/p>\n

However, the bonds are now worth less, so selling them crystallises losses to the exchequer while increasing the supplies to the market \u2013 suppressing demand and pushing up the interest rate, or yield, charged on the debt.<\/p>\n

The cost of government borrowing is already at multi-decade highs owing to the turmoil on financial markets as the Middle East conflict drives up the oil price<\/a>. On Monday the yield on the benchmark 10-year gilt passed 5.4%, its highest level since July 2007, while the 30-year rose to 5.93%, its highest level since March 1998.<\/p>\n

In August the Bank estimated its QT stance could result in total losses to the exchequer of \u00a3120bn if interest rates remain on the path expected by financial markets.<\/p>\n

Its governor, Andrew Bailey, has defended the policy, telling parliament\u2019s Treasury committee earlier this year that it was not in the MPC\u2019s remit to limit costs to the government in the short-term.<\/p>\n

Bank officials have signalled that bond sales will continue, though at a slower rate than expected earlier this year.<\/p>\n

On Tuesday it was reported that officials at Threadneedle Street have already drawn up plans with the Treasury and the Debt Management Office, which issues bonds on behalf of the government, to overhaul its money-printing programme. According to the Telegraph, the Bank will stop selling 20- and 30-year gilts bought under QT.<\/p>\n

It comes amid growing criticism of the sales, with critics accusing the Bank from ignoring the escalating bill they are creating for Healey before his first budget next month.<\/p>\n

John Healey will deliver his first budget next month. Photograph: Wiktor Szymanowicz\/Future Publishing\/Getty Images<\/p>\n

Louise Haigh, the Cabinet Office chief who managed Andy Burnham\u2019s campaign to be an MP, has previously pledged to stop Bailey from \u201cpursuing policies that actively damage the government\u2019s balance sheet\u201d.<\/p>\n

It is understood that Healey has rejected such calls from inside the cabinet to take a hard line with the Bank when he issues its new remit, preferring to accept assurances that it will be mindful of heaping extra losses on the Treasury.<\/p>\n

Charlie Bean, a former deputy governor of the Bank of England, said: \u201cI do not think it is politically sustainable for the MPC to be able to take such decisions without the involvement of the [Treasury] or else somehow reduce the magnitude of spillovers [to the Treasury].\u201d<\/p>\n

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John Llewellyn, a partner at the consultancy Independent Economics<\/a> and a former chief economist of the OECD, said the idea that there was a firewall between the Treasury and the central bank was a \u201cfiction\u201d and Bailey should expect to negotiate with the chancellor to minimise costs.<\/p>\n

Since active sales of QE bonds began in late 2022, the Bank has overseen one of the fastest reductions in central bank bond holdings among advanced economies, cutting the portfolio from a peak of \u00a3875bn to under \u00a3490bn.<\/p>\n

A year ago it cut its annual target for sales from \u00a3100bn to \u00a370bn <\/a>and is expected to lower that again this week to \u00a350bn. The US Federal Reserve stopped actively selling its portfolio of bonds last year.<\/p>\n

Christopher Mahon, a senior fund manager at Columbia Threadneedle Investments, and a visiting fellow at the Open University Business School, said rising costs showed the Bank \u201cshould scrap active sales outright\u201d.<\/p>\n

He said the Bank\u2019s methods had proved to be twice as expensive<\/a> as the European Central Bank\u2019s and four times as expensive as the US Federal Reserve programme, mainly due to the type of bonds it bought, which have collapsed in value since 2008.<\/p>\n

The Office for Budget Responsibility (OBR), the Treasury\u2019s independent forecaster, has estimated the Bank\u2019s bond sales will add about \u00a347bn to government debt by 2031, assuming active gilt sales of \u00a332bn a year.<\/p>\n

The Treasury and the Bank of England declined to comment.<\/p>\n","protected":false},"excerpt":{"rendered":"Economists have urged the chancellor, John Healey, to press the Bank of England to slow down its bond-selling…\n","protected":false},"author":2,"featured_media":771209,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[84,59,56,54,55],"class_list":["post-771208","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-gb","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/771208","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=771208"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/771208\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/771209"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=771208"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=771208"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=771208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}