The Bank of England’s monetary policy committee is facing pressure to slow or halt its government bond sales as the program generates substantial costs to the exchequer. The central bank has been conducting quantitative tightening since late 2022, selling bonds that were originally purchased during the 2008 financial crisis rescue effort. However, these assets have declined significantly in value, meaning their sale crystallizes losses while simultaneously increasing market supply and driving up borrowing costs.
The financial impact has become increasingly acute. The Bank estimated in August that losses could reach £120 billion if interest rates follow market expectations. Government borrowing costs have reached levels unseen in nearly two decades, with the yield on benchmark 10-year gilts exceeding 5.4% this week and 30-year yields climbing to 5.93%. These elevated costs come amid broader financial market turbulence linked to Middle East geopolitical developments affecting oil prices.
Government officials, economists, and financial specialists have criticized the approach. Former Bank of England deputy governor Charlie Bean argued that the separation between the Treasury and the monetary policy committee lacks political sustainability. Independent economists have suggested the Bank should abandon active sales entirely, noting that British bond sales have proven significantly more expensive than comparable programs at the European Central Bank or the Federal Reserve. The Bank has already reduced its annual sales target from £100 billion to £70 billion and is expected to lower it further to £50 billion this week.
Reports indicate the Bank is preparing operational changes, including halting sales of longer-dated bonds. Meanwhile, Chancellor John Healey has reportedly declined to take a confrontational approach with Bank leadership when issuing the institution’s new policy remit, instead accepting assurances that bond sales will be conducted with Treasury impacts in mind. The Office for Budget Responsibility projects the program will add approximately £47 billion to government debt through 2031.
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