Rishi Sunak ‘wasted £11bn paying too much interest’ on UK debt | Rishi Sunak
Rishi Sunak has been accused of wasting £11billion of taxpayers’ money by paying too much interest to service government debt.
The National Institute for Economic and Social Research (NIESR) said the losses resulted from the chancellor’s inability to insure against interest rate hikes on £900billion of reserves created under the scheme quantitative easing (QE).
The losses would exceed the amount the Tories 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, Professor Jagjit Chadha, told the Financial Times that Sunak’s actions had left the country with “a huge bill and continued high exposure to interest rate risk”.
Labor said the losses were “astronomical” and accused the government of “playing fast and loose” with public finances.
In response, the Treasury said it had put in place a “clear funding strategy” to meet the government’s funding needs.
According to the FT report, the Bank of England (BoE) created £895bn through the QE program, most of which was used to buy government bonds from pension funds and others investors.
When these investors placed the proceeds in commercial bank deposits with 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. State with a longer term.
Chadha said they had now calculated that Sunak’s failure to follow their advice – although he had regularly warned of the risks of inflation and higher interest rates on the costs of servicing the government debt – had cost taxpayers £11billion.
Shadow Treasury Minister Tulip Siddiq said: ‘This is astronomical sums for the Chancellor to lose, and working people are paying the check for his gross waste as he raises their taxes amid a cost crisis of life.
A Treasury spokesman said: “There are long-standing agreements around the Asset Purchase Facility – to date £120bn has been transferred to the UK Treasury and used to reduce our debt, but we have always been aware that at some point the direction of these payments might need to be reversed.
“We have a clear funding strategy to meet government funding needs, which we set independently of the Bank of England’s monetary policy decisions.
“It is up to the monetary policy committee to make decisions on quantitative easing operations to achieve the objectives within its jurisdiction, and we remain fully committed to its independence.”