My Question to the Chancellor about the Bank of England’s loss on bonds

Treasury has provided the following answer to your written parliamentary question (11535):

To ask the Chancellor of the Exchequer, what his latest estimate is of the Bank of England’s loss on bonds held in the Asset Purchase Facility guaranteed by his Department. (11535)

Tabled on: 01 June 2022

John Glen:

To date, £120 billion has been transferred to HM Treasury from the Asset Purchase Facility (APF) which has been used to reduce the government’s debt issuance. The size of future cash flows is uncertain and depends on developments in Bank rate, the speed of APF unwind, and the evolution of bond market prices. It is likely that as monetary conditions normalise HM Treasury will make cash transfers to the APF to cover losses.

However, the eventual size of the net payments to or from HMT should not be used as a measure of the success of asset purchases, or of the impact of the scheme on the public sector accounts as a whole. The scheme should instead be judged by the degree to which it helps the Monetary Policy Committee meet its objectives.

In their most recent forecast in March 2022, the Office of Budget Responsibility forecasted net cash transfers from the APF to the Treasury of £3.5bn between 2022-23 and 2026-27.

The answer was submitted on 13 Jun 2022 at 13:35.


Response.  This answer seems to imply the recent forecasts were wrong and we are now entering a time when the Bank’s losses the bonds it holds requires Treasury transfers. every time the Bank raises interest rates bonds sell off leading to losses on the Bank portfolio.


  1. Nottingham Lad Himself
    June 18, 2022

    It’s almost as entertaining as looking at historic designs for Perpetual Motion Machines.

  2. Javelin
    June 18, 2022

    Which investment bank issued and advised on the bond issuance? I have a good idea.

    Reply The government issues its own debt!

  3. Peter Wood
    June 18, 2022

    Good morning,

    Was there an answer to your question? Deliberate obfuscation and misdirection seems to be government strategy. How can you run, and trust, a government like this? Meanwhile Bunter has to travel a couple of thousand miles to find anybody who won’t give him a hard time. Bi-elections may bring the PCP a new perspective on Bunter’s value.

    BoE increases by a 1/4 %, while the Fed goes 3/4%.. Currency depreciation appears to be the policy here.

    1. Everhopeful
      June 18, 2022

      That particular MP is most upset because his constituents have accused him of voting for sh*t to be pumped into rivers.
      Economy, healthcare destruction in general, rivers…what’s the difference?

  4. Brian Tomkinson
    June 18, 2022

    John Glen: “The scheme should instead be judged by the degree to which it helps the Monetary Policy Committee meet its objectives.”

    The Bank of England: “The Bank’s Monetary Policy Objective is to maintain price stability within the United Kingdom and subject to that, to support the economic policy of Her Majesty’s Government including its objectives for growth and employment.”
    On that basis the scheme sounds like a resounding failure.

    1. Everhopeful
      June 18, 2022

      Will the BoE still be “independent” then?

  5. Bloke
    June 18, 2022

    A Minister for Precision should forecast a more accurate title for the OBR.
    ‘Office for Budget Recklessness’ is a closer fit than their billions in error.
    Too many of these interfering middlemen shift responsibility from where it belongs.
    Labour’s Devolution added another layer of Govt with all its twisted obstacles.
    Fortunately the nation rejected John Prescott’s crazy notion of yet another regional road block.

    MPs represent their constituents at Westminster and should enact whatever is best for them.
    Doing sensible things is easier without so much obstructive muddle in the middle.

    1. Timaction
      June 18, 2022

      We still got unwanted Mayors as another layer of political bureaucracy. Loads of politicos need pruning in size and scale at every level. Lords cut by 700 plus, MPs by at least half, no mayors, etc down the food chain. We also need radical reform of the management and selection processes for all health, public services, Government departments and quangos including the emergency services. Woke/pc needs to be removed like a cancerous growth that it is. Imagine the savings!
      This Government is a roadblock to no where. All talk and no action. Rwanda flights, Northern Ireland protocol etc etc. Just more and more interference with private businesses (threats to power generators) by people who are frankly ………..clueless.
      An example. Gove. So benefits people cannot be denied private rental properties by private landlords or those having pets. Really! So the tenant find people offer you 4 couples who work with well established jobs and credentials or a never worked single Mother with 4 children and no work or credit rating………….duh. Who are they going to choose unless he is going to legislate to make private Landlords take inferior tenants? Socialism is at the core of this left wing Liberal Green, eco warrior, foolish Government and we’re all paying the price for its gross incompetence everywhere.

  6. James1
    June 18, 2022

    It’s more than a little unfortunate that besmirching the currency looks set to continue.

    1. Timaction
      June 18, 2022

      Indeed and we all pay the price for that and inflation will continue unless we match our biggest trading partner, the US of A.

      1. Nottingham Lad Himself
        June 18, 2022

        The UK’s biggest trading partner by far remains the Single Market of the European Union, though significantly damaged by brexit.

        1. Peter2
          June 18, 2022

          Well European nations various, because nobody really trades with the EU.
          Odd how the biggest value trading nations are not members of the Single Market at all.
          South Korea
          How does that happen NHL?

          1. Nottingham Lad Himself
            June 19, 2022

            Rolls eyes.

          2. Peter2
            June 20, 2022

            Useless response NHL

    June 18, 2022

    John his correct in his analysis. What we are seeing is an act of financial deceit and they know it.

    They can give this act of financial terrorism all the fancy sounding labels they like but when it comes down to it we are seeing the dilution of this nation’s productive capacity to finance a parasitic political construct namely the Socialist client State.

    1. DOMINIC
      June 18, 2022

      ‘John is’

      1. Hope
        June 18, 2022

        This is deliberate make no mistake.

        JR, is trying to be subtle through party loyalty, but he knows the ruinous path the chaotic misfit is taking the UK. Like Cameron and May before he has no national or patriotic interest whatsoever. In front of his own party he is destroying our way of life- economically, socially and politically.
        Tory MPs are condoning the systematic destruction of our economy and way of life.

  8. Lifelogic
    June 18, 2022

    To you response – Indeed.

    So now we have the Children’s Commissioner telling us “Girls do like hard maths”. As indeed some obviously do. But perhaps this Philosophy & Theology graduate did not like it herself enough to bother to look at some relevant figures. Well over 4 men for every women in subjects like Further Maths, Computer Science, Physics and Most Engineering A levels and degrees. This despite the fact that there are far more women at university overall than men (over 30% more). Two or three women have even come top (Senior Wrangler) in the Cambridge Maths finals over the years.

    Though engineering on humans “Medicine” is now slightly over 50% women. They seem to prefer engineering on humans to bridges, cars, aircraft, computers, engines, turbines… perhaps.

    1. Lifelogic
      June 18, 2022

      It is logical that more women choose to go to university than men as it makes rather more economic sense for women as they are far less likely to have to repay the soft loans that the government provide (many for totally worthless degrees in dross subjects alas). This is due to females taking far more career breaks and choosing to do more part time and lower paid work to fit in with their family commitments. The student loan system is clearly very anti-male discriminatory. Perhaps the children’s commissioner should look at this blatant anti-male discrimination and the 1.3 women to every man at university (and these are heavily in the more worthless subjects too.

      1. Original Richard
        June 18, 2022

        Lifelogic :

        What about making the universities responsible for student loans instead of the taxpayer?

        If the courses a university provides are unable to recoup the loans then the university goes bust, or at least it stops providing those mickey mouse courses when the money it’s losing starts to impact upon the educational establishments’ salaries and pensions.

        At the same time we need to cut back on the 120,000 Chinese “students” in our universities.

        1. a-tracy
          June 18, 2022

          OR well if you make the Universities responsible then you’d get hundreds more Chinese, US, Indian students paying the full fees instead of the capped fees?

          1. Roy Grainger
            June 18, 2022

            Foreign students don’t pay the capped fees (£9k per year). They get charged up to £24k a year at some UK universities.

          2. Original Richard
            June 18, 2022

            a-tracy :

            I did think of this.

            I would restrict the number of visas issued.

            All these Chinese “students” are a threat to our security.

        2. Lifelogic
          June 18, 2022

          Indeed but I would just stop all the soft loans for duff subjects and anyone with lower than say 3Bs at A level – that would rightly kill over 80% of them.

  9. Mark B
    June 18, 2022

    Good morning.

    It is expected that interest rates across the pond are more than likely to go even higher. It therefore is a given that interest rates here will also rise to control inflation.

    High inflation. High taxes. And soon to be, high interest rates.

    The scheme should instead be judged by the degree to which it helps the Monetary Policy Committee meet its objectives.

    When reading the quote above I immediately thought, “This sounds a little like the US Militaries body count policy during the Vietnam war.” For some inexplicable reason, the US Military and government became fixated on this one statistic to the exclusion of much else, all in the failed belief that this one statistic would win them the war.

    It seems to me that we are committing the same mindset failure in economics that the Americans had. ie Making decision sole to achieve a stated outcome(s), despite said outcome(s) having no real benefit to either the individual or society.

    1. Mitchel
      June 18, 2022

      Vladimir Putin at the SPIEF yesterday:

      “There will be a deep degradation in Europe,current elites are going to be replaced.Their wrong policies will lead to an increase in nationalist and extremist sentiment in European society…….current changes in economics and international politics are tectonic and revolutionary.”(Amusingly,he also added,noding to Mark Twain,that”reports of my death are greatly exaggerated.”)

      There was a good article(by his standards!) by Wolfgang Munchau in Euro Intelligence on 22/5/22:”The West and the Rest.”

      “….I see a danger of the world becoming subject to two trading blocs-the west and the rest.Supply chains will be reorganized to stay within them.Russia’s energy,wheat,metals and rare earths will be consumed,but not here.We keep the BigMacs.

      To me economic sanctions look like the last hurrah of a dysfunctional concept known as the west.The Ukraine war is a catalyst of massive de-globalization.”

      Of developed nations this will be most catastrophic for the UK.

      1. Nottingham Lad Himself
        June 18, 2022

        There seems to be a pretty globally-co-ordinated effort to help Ukraine repel its aggressor to me.

      2. Richard II
        June 18, 2022

        Hard to disagree with any of that, Mitchel. Putin is a very skilful player, and our politicians have got us into a mess that’s way deeper than they can cope with. The worst thing is that even if we dropped these self-harming sanctions tomorrow, there’s no guarantee that Russia would still want the West to be its major client any more. It is finding more amenable customers elsewhere.

        To my mind, it’s just too bad – what has happened can’t be undone, and we have to adapt. One thing is now absolutely imperative. This country must become more self-sufficient in food and energy. Even the politicians of the poor calibre we have here are beginning to wake up to that.

        1. Original Richard
          June 18, 2022

          Richard II : “Even the politicians of the poor calibre we have here are beginning to wake up to that.”

          It’s all by design.

          Even poor calibre politicians and civil servants would make a correct decision once in a while purely by chance.

          Net Zero is designed to destroy the economy. The reason they’re not concerned when it is demonstrated to them that we will not have sufficient energy using intermittent wind power for our vehicles and heating is because they do not intend us to have either.

  10. a-tracy
    June 18, 2022

    How does this impact on our lives John I am interested to know?

    Why don’t the government use Bonds to build apartments? If you build social bond retirement apartments in each region and do them just to give a fixed bond % repayment and not get too greedy then why not give us all a social housing trust pension fund, the set % income would then cost less to the housing benefit pot, give the type of social homes they need and free up larger homes for families.

    It is the public who had to top up bad investment choices of the pension funds of public sector workers at local councils (I.e. Icelandic bank investments 500,000 that will do nicely residents oh sorry we can’t afford your social care you’ll need to pay more for that), this is grossly unfair when we all have to take the losses on our own pensions without a top up from our neighbours. This imbalance between final salary safe pensions in the public sector so people making these decisions don’t face the risk of them makes me fume and the fact the general public let you all get away with it whilst attacking our pensions and giving us no safety net and attacking our savings that we have to have because we can’t rely on the pension vehicles in place is frankly appalling.

    1. Nottingham Lad Himself
      June 18, 2022

      I think that you will find that many, perhaps most ordinary people in the public sector are no longer accruing final salary pension entitlements, nor have been for some years now.

      That may be different for senior staff, but then those in the private sector are also on defined benefits, notably in finance, in banking.

      1. a-tracy
        June 18, 2022

        Then we should all be in Nest for our workplace pensions and invest ourselves privately instead of having taxpayers bail out the shortfalls for those with defined benefits.

        1. Nottingham Lad Himself
          June 19, 2022

          Ever heard of honouring contracts?

          1. a-tracy
            June 20, 2022

            Negotiating contracts is a thing NLH, if people want more money today then their whole package needs looking at not just cherry-picking, the 25% employer contribution to defined benefit pensions is so expensive and they don’t appreciate it, so give them the extra 15% pay today and only put 10% in their pension and that is more agreeable than most people get.
            By the way I checked a lot of the banks you referred to the other day are not on defined benefit now, they get a % contribution that the employee is aware of they can use salary sacrifice to put more in for their pension to take the salary today.

    2. Mike Wilson
      June 18, 2022


      Couldn’t agree more.

    3. anon
      June 19, 2022

      Perhaps we should ALL be in a singular NEST type fund to get tax relief, at the same accrual rate. No other tax privileged schemes allowed.

      It makes sense if the market is effectively being manipulated by Central Bank Policies.

  11. Everhopeful
    June 18, 2022

    They thought that QE would yield a vast windfall of £11.3 billion.
    For some reason (?) they paid too high a price for the bonds they bought with the fake money and now they face a vast £3 billion loss. Windfall will amount to nothing.
    And guess who pays?? £115 billion paid by “the state” ( little old useless us) because of an indemnity between the govt. and BoE.
    Weird ever escalating figures.
    Did they really do that? And why?
    I look forward to seeing the government busily mining for coal!
    Orange suits and leg irons.

  12. formula57
    June 18, 2022

    More from the Government of “In their most recent forecast in March 2022, …” – did time stop then for Ministers and that is why they have noticed neither gas price rises, inflation generally, interest rate increases, contraction in GDP and other like events since that have called forth no reaction from them?

    They should learn from your Response that living in the real world in real time enables one to be in touch with events in ways myopic gazing at historical OBR forecasts does not! What a shower they are and have sat too long, as O. Cromwell would say.

  13. Roy Grainger
    June 18, 2022

    So the BoE needs to keep interest rates low to minimise their losses. But if that leads to higher inflation doesn’t the government then have to pay much more on the large number of index linked bonds they have issued over recent years ?

  14. Mark
    June 18, 2022

    There is a very clear explanation of the principles of the operations of BEAPFF here:

    Unfortunately that is now where the transparency ends. There is a BEQB article from 2013 Q1 here:

    Which used to have a spreadsheet attached that allowed illustrative calculations to be done on liquidation of the portfolio that is no longer available. I have an historic version stored away, but unfortunately it is no longer much use, particularly since the BoE no longer seem to publish details of the gilts held by the fund and their acquisition cost, so it is not possible to attempt to update it. Perhaps it is worth asking that the data that used to be published at should continue to be published (last recorded at Wayback in December, 2019 but I have no data since March 2014). That included the premium to par for every purchase through the total cost of the purchase and the total nominal (i.e. redemption) amount purchased, and allowed the complete cashflow to be calculated for each holding.

    As at March 2014, the fund had paid a total premium of £49.8bn to par across various maturities, with total purchases amounting to £391.6bn. Coupon income since then to date on that portfolio totals £90bn, but with rising redemptions the income for the year ahead is just £6.4bn. The fund has more than doubled since then, and redeemed gilts will have been rolled over into other holdings, all likely at a large premium to par. Technically, so long as the redemption yield at purchase exceeds the interest cost of the loan from the BoE to the fund the coupon income will cover the capital losses, even though the Treasury gets the coupon back again in the interim.

    Of course, the damage done by ZIRP and QE will only come to light as interest rates and inflation are forced higher, with defaults on mortgages and erosion of savings. This will only get much worse if we keep on issuing green gilts invested in projects with negative real paybacks in support of net zero.

    1. Margaretbj.
      June 19, 2022

      Like £10 per day to drive. Clean air project. That sounds like an overly greedy pay back.

  15. Nigel
    June 18, 2022

    Speaking for For freedom and Prosperity – along with tagging the refugees who arrive here illegally they should instead be tagged around their necks with an additional flashing light so that we can see them coming – also tattooing a number on their arms might be extra touch.

  16. Pauline Baxter
    June 19, 2022

    If I understand this rightly, (and that is a bit doubtful), this is another reason why we should not be raising interest rates at the moment.

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