Rishi Sunak is accused of squandering £11 billion in taxpayer funds by neglecting to guarantee the UK’s burden of debt against interest rate hikes.
The tremendous costs of not taking out protection on roughly £900 billion in cash ‘created’ by the Bank of England to support the economy have been underlined by a reputable think-tank.
The bill, which is the result of failing to convert the assets into longer-term government bonds, is greater than the amount Gordon Brown is said to have lost the country when he sold a portion of the country’s gold holdings at rock-bottom prices.
The Bank of England’s quantitative easing program created £895 billion in new money, the majority of which was used to buy government bonds from pension funds and other investors.
When those investors deposited the funds in commercial bank deposits at the Bank of England, the Bank was required to pay interest at the official rate.
When the official rate was still 0.1 percent last year, the National Institute of Economic and Social Research (NIESR) encouraged the government to convert the debt into longer-term government bonds to protect the expense of servicing it from rising interest rates.
Professor Jagjit Chadha, the institute’s head, told the Financial Times that Mr Sunak’s reluctance to listen to their advice has cost taxpayers £11 billion, despite the institute’s repeated warnings about the consequences of increased inflation and interest rates on the expenses of servicing the government’s debt.
‘It would have been much better to have reduced the scale of short-term liabilities earlier, as we argued for some time, and to exploit the benefits of longer-term debt issuance,’ he told the FT.
Labour said the losses were ‘astronomical’ and accused the Government of ‘playing fast and loose’ with the public finances.
Shadow Treasury minister Tulip Siddiq said: ‘These are astronomical sums for the Chancellor to lose, and leaves working people picking up the cheque for his severe wastefulness while he hikes their taxes in the middle of a cost-of-living crisis.
‘This Government has played fast and loose with taxpayers’ money. Britain deserves a government that respects public money and delivers for people across the country.’
But the Treasury said that it had a ‘clear financing strategy’ in place.
A spokesman said: ‘There are long-standing arrangements around the asset purchase facility – to date £120billion has been transferred to HM Treasury and used to reduce our debt, but we have always been aware that at some point the direction of those payments may need to reverse.
‘We have a clear financing strategy to meet the Government’s funding needs, which we set independently of the Bank of England’s monetary policy decisions.
‘It is for the Monetary Policy Committee to take decisions on quantitative easing operations to meet the objectives in their remit, and we remain fully committed to their independence.’