According to the OBR the Bank of England will lose us £288bn from autumn 2022 to the end of their bond portfolio in 2036. The Chancellor has recently approved some wide ranging changes to the way the Bank handles the bonds to try to limit the damage and delay some of these losses. The latest policy set out in the Chancellor’s letter of 17 th September 2026 reminds us that contrary to the general belief that the Bank is independent and decides these matters,the Treasury still has most of the power.
Gordon Brown in 1997-8 made radical changes to the Bank. People remember these for his spin that he was making the Bank “independent” when most of what he did stripped the Bank of crucial powers to control money, markets and banks. The power to issue new government debt in the market was given to a new body, the DMO, in the Treasury. The power to regulate the commercial banks and other financial markets was given to the Financial Services Authority. He removed the powers of oversight of money and bullion markets. He removed the executive power of the Court of the Bank, making it a non executive supervisory body.
In return he gave the Bank the sole power to fix the base rate and to provide independent forecasts of inflation and the economy. Even these powers had an override allowing a Chancellor to intervene in the public interest if necessary. Alastair Darling with other Finance Ministers had to do this to prevent extreme Bank of England tightening bringing down even more banks. The government sets the target the Bank has to hit and can change that,as Gordon Brown himself did when he switched from RPI to CPI, a softer target.
His system unwound with the banking crash, when the regulatory partitions he created impeded prevention and treatment. The Bank and FSA blamed each other for the big failings to regulate the banks. The Coalition government gave the Bank of England some return powers over banking and financial market regulation to correct the Brown mistakes.
The crash itself led the Treasury and Bank to start Quantitative Easing to create looser and cheaper money and credit. The Bank bought up government debt at rising prices to get longer term interest charges down. This allowed the government to borrow more at affordable rates to pump prime the economy. Shadow Chancellor George Osborne argued against, claiming this was money printing which was bound to be inflationary. When he took over as Chancellor he changed his view and himself embarked on more Quantitative Easing. He inherited £200 bn from Chancellor Darling and added a further £175 bn in three tranches. Philip Hammond did one tranche of £70bn. At the time of the covid lockdowns Rishi Sunak approved two tranches for £300bn and added a third tranche of £150 bn when recovery was well underway.
Each time more QE was proposed the Bank needed the Chancellor to sign a letter granting consent, and to sign an agreement that the Treasury(taxpayers) would pay for any losses caused by owning these bonds. Towards the end of 2022 a nasty inflation was embedding. The Bank and Treasury without conceding QE had been inflationary reversed the policy. The Bank started selling the bonds back to the private sector, often at big losses. The Treasury who had pocketed the profits on the way up started paying out larger sums to reimburse the Bank.
Last week the Treasury and Bank at last realised that the scale of the losses under the bond sales scheme was unacceptable. The Chancellor has now authorised the Bank to hold the £120 bn of longer dated bonds with the largest losses at current prices until they eventually mature, avoiding taking big losses on sale. He has also said in principle the Treasury will start buying the bonds the Bank wants to sell rather than pushing them out to private buyers in the market which might disturb prices more. This will however mean the government having to borrow more itself to pay for the bonds it is taking from the Bank, so there will still be negative market pressures from government actions.
I have long argued against the damaging actions of these programmes. Whilst I supported the first two tranches of covid QE when the government locked down most of the economy, as we needed a strong offset, I thought the third tranche was too much and likely to prove inflationary. I tried to get the government to borrow more of the money it needed during the QE phase for longer time periods, as the cheap debt available was clearly an artificial bargain. They insisted on continuing to borrow a lot for shorter dates. We lost the opportunity to have cheap debt for longer.
I have argued against the bond sales in the markets under QT. I urged them to do what the Fed and European Central Bank are doing, winding down their bond portfolios as the bonds reach repayment but not before. Instead the UK has sold large quantities at large losses which the taxpayer has to pay. Private investors have benefitted twice from the programme. They sold out to the Bank at very high prices and can now buy back at much cheaper prices. The Bank has invaded fiscal policy as it demands the money for its losses.
This is a sorry tale. We await the recalculation to see how much of the planned £288 bn big loss they can avoid by the latest policy. The Chancellor’s letter makes clear this is not the sole preserve of an independent Bank but a joint policy that has gone wrong where the Treasury and taxpayers pick up the bill and are ultimately responsible. When I tried to get previous Chancellors to stop the sales and curb the losses I was told the Bank is independent. Yet it was their signatures on the letters that underpin the whole policy and mean they had every right to intervene, as the latest Chancellor has now on a Bank rethink agreed to do. He needs to do more to curb more of the losses that are still being needlessly incurred.
Pity the poor taxpayer. Gordon Brown is the main cause of this by badly changing the regulatory system to allow the big boom and banking bust. This led directly to Darling’s Treasury inventing QE and setting up the taxpayer for losses. The covid episode compounded the problem based on more wrong thinking by the Bank and Treasury. Since 2022 there has been needless harm visited on taxpayers by taking big losses on selling bonds bought at silly prices during peak QE. Other Central Banks avoided extreme losses because they had no Treasury guarantee to fall back on. It is worrying that so many Chancellors signed this all off without asking how much taxpayers might lose.
October 1, 2026
By any metric Gordon Brown wasa disaster. His claim to have illiminated boom and bust was a joke. Selling our gold at the bottom of the market after announcing the sale beforehand was criminal.
I would guess in true liebour style Burnham will turn to printing money to fund his pet projects ans destroy all our savings in the process.
Just who is profiting from this Bond merry go round?
Reply The private sector including people’s pension funds and insurance schemes who sold the bonds at high prices to the Bank and are now buying them back at much lower prices.
October 1, 2026
You too can profit from the bond merry go round, by buying discounted bonds with a low coupon and keeping them to maturity. You pay tax on the interest, but not the capital gain when you sell because you are surrendering at face value.
October 1, 2026
That just demonstrates the stupidity of the BoE actions s. That’s real money being removed from the economy.
October 1, 2026
Almost everything Blair and Brown did was a total disaster see
“Blair did more harm to Britain than two world wars.” David Starkey video and Gordon is a Moron book.
Alas the “Conservatives” failed to undo much of it indeed they actually built on it and made it every worse with even more red tape and the appalling lunacies of net zero, their Covid fiascos, every more red tape, the Windsor accord, modern slavery act, the many Osborne lunacies… to be fair Cameron did half kill hip packs but even there he retained the pointless EPC certificates. Other than that almost all was negative.
October 1, 2026
Did Truss and Kwarteng not know this?
Why did they allow the BOE to sink them?
Reply No they did not understand the gilt market and did not listen to those of us who could see the damage being done. They also spent too much on energy subsidies in a give away budget.
October 1, 2026
I don’t think Kwarteng and Truss were given any time to ‘spend too much’ on the Energy price guarantee. Rishi Sunak took over and kept it going in 2023. I’ll check whether this Diary took issue with him over that.
Reply I did speak against the energy subsidies for all. I did not vote for the Hunt budget
October 1, 2026
I think you’ll find that Kwarteng and Truss promised an energy price guarantee for 6 months of tax year 2022/23 and all of 2023/24 tax year for which the latter was totally unfunded.
October 1, 2026
This country runs on tick, and has done since the 1980’s
The UK national debt, as of June 2026, was £3 TRILLION
Mortgages secured on property account for another £1.7 TRILLION
Student loans, another £295 billion
Consumer credit, car loans, credit cards, personal loans, another £255 billion
The total combined debt of about £5.21 trillion is approximately 180% of the UK’s current Gross Domestic Product
In total the interest is costing us about £260 billion each year, or £24 billion a month. Is this sustainable? No
October 1, 2026
There is not £5.21 trillion of sterling in existence.
£260 billion per year is being made by financial institutions on largely made up money.
Nice work if you can get it.
October 1, 2026
Only £288 billion of Taxpayers money! And those that stole this hard eaned money from the Taxpayer? The UK’s Management, its Pariament, its Government?
To wound up in thier Socialist command and control projects to care. As they demonstrate daily they have no concept of ‘job’ thier ‘job’, its about dictating Socialist control and only that
October 1, 2026
And who gets the bonuses, the financial rewards from steeling from the taxpayer?
October 1, 2026
Still they can change, and whatever has been previously said inferred or seemingly written in stone use the surplus NHI pension funds to prop up the phoney consept of a independant BoE.
After all this is a Socialist Parliament with its Government that collectivly hates the UK and its People. Democracy and the will of the people
October 1, 2026
All very sensible.
Proof that some people can survive even being a LibDim (president of the Oxford University section) and reading PPE Oxon. with her brain fairly intact.
THE DAILY T • PODCAST
‘Burnham will destroy Britain!’ Indeed he will unless stopped Liz Truss unleashes on the PM
Camilla and Tim are joined by former PM Liz Truss
A great shame the BoE, very many Sunak supporting “Conservative” MPs and the blob destroyers her sensible pro growth agenda. Replacing her by lefty globalists Sunak who wasted enormous sums of money doing net harms during COVID and tax to death Hunt. SUNAK who then abandoned ship six months early to give this appalling Labour Party a vast majority.
Reply Truss resigned. She did not have to and could not face a vote for her first year.
October 1, 2026
It seems to me it was deliberate sabotage by the blob.
It was indeed a mistake to send on energy subsidies. People should decided how they spend their money some make want heating on other may choose to wealth thermals their ski jacket and use an electric blanket for the bed.
THE DAILY T • PODCAST
‘Burnham will destroy Britain!’ Liz Truss unleashes on the PM
Camilla and Tim are joined by former PM Liz Truss
I see the government is to finally scrap the moronic sick joke “one (thousand+) in one out” deal with the French.
October 1, 2026
According to this mornings Daily Express, PM Burnham has a achieved 96% rating of distrust. Just 3% of those that voted trust him to do the ‘right thing’
October 1, 2026
Must be that pesky faaaar rite again.
October 1, 2026
Well once the Ministry of Truth/Information/Disinformation, is up and running there will be no such hit pieces whether true or exaggerated.
We will all hear of the wonders of Burnham, any voices of dissent will be crushed.
Whilst that sounds a bit like stretching a point I don’t think it is.
Socialist/Communist/Globalist ideology demands total control of not just your money, but also needs to control the information you are allowed and of course your opinion.
It cannot survive without that level of intimidation on people.
Some will point out that ‘right wing’ dictatorships do the same. Of course they do, it goes with the territory of dictatorship.
However, the former group hoodwink those easily led into believing they are the caring, kind altruistic people, and everything they do is for you.
That of course is not true, and therefore far worse in my opinion as an ideology and set of people.
October 1, 2026
Hardly surprising he hardly even mentions the real and dire issues of immigration (legal and illegal) border control and crime levels, defence, the financial crisis, the out of control benefits, law and order, two tier justice, interest rates…far more interested in £2 bus fares, playing the Smiths, the No 10 up north lunacy, his deceased father’s dementia issues, making tea and Pork Scratchings. Also his wife’s promotion to “First Lady” to the Mayor of the UK.
October 1, 2026
Office for Budget Responsibility (OBR): says Net Zero has a total cost of £1.4tn. Green levies add up to £930 annually, funding those with EV’s, so-called green energy etc. Then to the BoE goes £288 billion. So on, & so on.
Not a penny of this funding is from ‘Government’ (they don’t have money), it is the forcing of those that pay tax to dig deeper, the economy to dig deeper. The House of Commons Brain Cell doesn’t get it! they are draining the economy, removing the seed corn from the economy that is the ‘only’ thing that perpetuates and grows it. 650 MP’s all get to ‘own’ the UK’s destruction they are not only allowing it to happen they are forcing it to happen
October 1, 2026
So the FCA and the BoE were blaming each other. Who was head of the FCA and who became head of the BoE?
October 1, 2026
While Bailey was head of the FCA when they moronically forced the bank to charge absurly high interest rates (one size fits all) on all personal overdrafts rates – mine jumped from base plus 2.5% to 39.9% effectively meaning I would no longer use it. This regardless of borrowers credit status. Clearly the man had/has no understanding of sensible banking and lending!
This, in effect, forced sound borrowers to subsidised high risk borrowers another back door tax on them.
October 1, 2026
I see that the UK banking sector has dropped 3.5% this morning …and is still dropping
https://www.lse.co.uk/sectors/banking/
October 1, 2026
The government borrowing money to buy debt from the BoE is about as tragic as it gets. If you can picture a snake eating itself from the tail up that is what the treasury is doing.
October 1, 2026
TBH Gordon Brown is ancient history with no relevance to today.
Plainly though Lord J is a clever and knowledgeable fellow. I am waiting to see him become special adviser to Scott Bessent who seems to be having his own Gordon Brown moment in the USA. Sure as egg are eggs Mr Bessent will pass into history as a clever chap who failed. Someone else for wiseacres to take a pop at – uselessly.
October 1, 2026
indubitably correct
October 1, 2026
Only goes to show it’ll take experts not politicians to get us out of this mess. We are in need of an independent oversight group free of vested interests possibly the IMF.
October 1, 2026
Question : Is it legally possible to bring a financial misconduct complaint / case against the BoE? Perhaps by a Taxpayers Alliance.
October 1, 2026
We can see that Burnham understands being nice to everyone, but not money. Money’s not always nice to you. Borrow too much, spend on fripperies rather than truly investing for return, and money will hand you the consequences. It’s not for control freaks who don’t understand how it works.
October 1, 2026
“It is worrying that so many Chancellors signed this all off without asking how much taxpayers might lose.”
The real question which needs answering is why?
October 1, 2026
it strikes me that simply repeating what JD Vance and Elon have been saying, and shifted to UK rather than US… would be a landslide election winning set of policies
October 1, 2026
61 illegals on Tuesday, the govt website was late reporting
October 1, 2026
An illegal in every postcode is the plan. And I don’t mean the areas, districts and sectors.
October 2, 2026
i.e. share the love
October 2, 2026
The scale of incompetence is breathtaking, these appalling mistakes were made by senior politicians when Ministers with no accountability. Indeed their arrogance knows no bounds as they actively seek to influence Mr Burnham. There’s no remorse or sense of shame whatsoever and certainly no apology. It is small wonder we are in such a mess as a Nation.