"These are astronomical sums for the chancellor to lose"
Rishi Sunak allegedly wasted £11 billion of taxpayers’ money by paying too much interest on UK government debt.
The National Institute of Economic and Social Research (NIESR) said the losses stemmed from the Chancellor’s failure to insure against interest rate rises.
It meant higher than necessary payments on £900 billion of reserves created through the quantitative easing (QE) programme.
The Treasury said it has “a clear financing strategy” on debt.
NIESR’s Professor Jagjit Chadha told the Financial Times that Rishi Sunak’s actions had left the country with “an enormous bill and heavy continuing exposure to interest rate risk”.
The Financial Times reported that the Bank of England (BoE) created £895 billion of money through QE, most of which was used to buy government bonds from pension funds and other investors.
When those investors put the proceeds in commercial bank deposits at the Bank, it had to pay interest at its official interest rate.
In 2021, when the official rate was 0.1%, NIESR said the government should have insured the cost of servicing this debt against the risk of rising interest rates.
It suggested converting the debt into government bonds with longer to pay it back.
According to Professor Chadha, he said Mr Sunak’s failure to do this had cost the taxpayer £11 billion.
He said: “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.”
Labour’s 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.”
A Treasury spokesperson said: “There are long-standing arrangements around the asset purchase facility – to date, £120 billion 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 [Bank’s] 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.”
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