Notification of Contingent Liability

Rachel Reeves Excerpts

Tuesday 12th November 2024 Written Statements

[The Chancellor of the Exchequer (Rachel Reeves)]

The independent Monetary Policy Committee of the Bank of England decided at its meeting ending on 3 February 2022 to reduce the stocks of UK Government bonds and sterling non-financial investment-grade corporate bonds held in the asset purchase facility by ceasing to reinvest maturing securities. The Bank ceased reinvestment of assets in this portfolio in February 2022 and commenced sales of corporate bonds on 28 September 2022, and sales of gilts acquired for monetary policy purposes on 1 November 2022. The sales of corporate bonds ceased on 6 June 2023, with a small number of outstanding corporate bonds reaching maturity on 5 April 2024. Therefore, the APF is now comprised solely of gilts.

The Chancellor at the time agreed a joint approach with the Governor of the Bank of England in an exchange of letters on 3 February 2022 to reduce the maximum authorised size of the APF for asset purchases every six months, as the size of APF holdings reduces.

Since 30 April 2024 when the maximum authorised size of the APF was last reduced, the total stock of assets held by the APF for monetary policy purposes has fallen further from £704.2 billion to £654.5 billion. In line with the approach agreed with the Governor, the authorised maximum total size of the APF has therefore been reduced to £654.5 billion, comprising entirely of gilts.

The risk control framework previously agreed with the Bank will remain in place, and HM Treasury will continue to monitor risks to public funds from the APF through regular risk oversight meetings and enhanced information sharing with the Bank.

There will continue to be an opportunity for HM Treasury to provide views to the MPC on the design of the schemes within the APF, as they affect the Government’s broader economic objectives and may pose risks to the Exchequer.

The Government will continue to indemnify the Bank, the APF and its directors from any losses arising out of, or in connection with, the facility. Provision for any payment due under the liability will continue to be sought through the normal supply procedure.

A full departmental minute has been laid in Parliament providing more detail on this contingent liability.

[HCWS208]