We store cookies on your device to make sure we give you the best experience on this website. I'm fine with this - Turn cookies off
Switch to an accessible version of this website which is easier to read. (requires cookies)

Chancellor loses another £11 billion of public money

Just when we thought that the huge amount of public money wasted by this Tory Government could not be matched, it transpires that the Chancellor of the Exchequer has outdone himself.

iuy7The Guardian reports that Rishi Sunak has been accused of wasting £11bn of taxpayers' money by paying too much in interest servicing the government's debt.

The paper says that according to the National Institute of Economic and Social Research (NIESR) the losses were the result of the chancellor's failure to insure against interest rate rises on £900bn of reserves created through the quantitative easing (QE) programme:

The losses were said to exceed the amount that the Conservatives have accused former chancellor Gordon Brown of losing when he sold some of the UK's gold reserves at rock bottom prices.

The institute's director, Prof Jagjit Chadha, told the Financial Times that Sunak's actions had left the country with "an enormous bill and heavy continuing exposure to interest rate risk".

Labour said the losses were "astronomical" and accused the government of "playing fast and loose" with the public finances.

In response, the Treasury said that it had a "clear financing strategy" in place to meet the government's funding needs.

According to the FT report, the Bank of England (BoE) created £895bn of money through the Quantitative Easing programme, 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 BoE, the Bank had to pay interest at its official interest rate.

Last year, when the official rate was still 0.1%, the NIESR urged the government to insure the cost of servicing this debt against the risk of rising interest rates by converting it into government bonds with longer maturity.

Chadha said they had now calculated that Sunak's failure to heed their advice - despite having regularly warned about the risks of higher inflation and interest rates on the costs of servicing the government's debt - had cost taxpayers £11bn.

Who says there's no magic money tree?