The director of the National Institute of Economic and Social Research stated that the chancellor’s actions left the country with an “enormous bill,” while Labour characterized the losses as “astronomical” and accused the government of “playing fast and light” with public finances.
According to the National Institute of Economic and Social Research (NIESR), the chancellor failed to protect against an increase in interest rates.
Professor Jagjit Chadha, director of the institute, told the Financial Times that Mr. Sunak’s actions had left the nation with “an enormous bill and heavy continuing exposure to interest rate risk,” while Labour described the losses as “astronomical” and accused the government of “playing fast and loose with public finances.”
Treasury officials stated that a “clear financial strategy” was in place to meet the government’s funding requirements.
The majority of the £895bn issued by the Bank of England’s quantitative easing (QE) program was used to purchase government bonds from pension funds and other investors, according to the Financial Times.
When investors deposited the proceeds in commercial bank accounts at the BoE, the Bank was obligated to pay interest at its official rate.
Last year, when the official rate was still 0.1 percent, the NIESR encouraged the government to convert its debt into longer-maturity government bonds to hedge against the danger of rising interest rates.
Prof. Chadha stated that they estimated Mr. Sunak’s refusal to accept their recommendations cost taxpayers £11 billion.
As we have said for some time, it would have been preferable to lower the scale of short-term liabilities earlier and capitalize on the benefits of longer-term debt issuance, he told the FT.
Tulip Siddiq, Labour’s shadow finance minister, stated, “These are enormous sums for the chancellor to lose, leaving working people to pay for his extreme wastefulness while he raises their taxes during a cost-of-living crisis.
This government has been irresponsible with taxpayer funds. Britain deserves a government that protects public funds and provides for its citizens.”
A Treasury official stated, “There are long-standing provisions 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 mindful that the direction of these payments may need to be reversed at some stage.
“We have established a clear financial strategy to satisfy the government’s funding needs, which is independent of the Bank of England’s monetary policy decisions.
“It is the responsibility of the Monetary Policy Committee to decide on quantitative easing operations to fulfill their mandated objectives, and we remain completely committed to their independence.”
