Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of the approach to quantitative tightening undertaken by the European Central Bank and US Federal Reserve, which allow the relevant bonds to mature rather than engaging in the sale of such bonds.

The Bank of England has operational independence from the Government to carry out its statutory responsibilities for monetary policy, including quantitative easing and quantitative tightening.

HM Treasury’s response to the Treasury Select Committee’s inquiry into QT set out that different unwind paces will impact the time profile of when losses are incurred but are expected to have little effect on total cost in present value terms. Therefore, all else equal, there is no reason to believe that holding gilts for longer would avoid these losses. Instead, a higher net interest cost would be incurred from holding the portfolio for longer. QT also reduces the sensitivity of the public finances to changes in interest rates.

Since October 2022, HM Treasury has transferred £107.64bn to the Bank of England to cover losses arising from the indemnity of the Asset Purchase Facility, the vehicle used to implement quantitative easing. This covers losses incurred from net interest costs and the sale and redemption of bonds as the portfolio is unwound.  Since 2013, the Bank of England has transferred £123.85bn to HM Treasury, giving HM Treasury a net position of £16.21bn to date.

Data on these cash transfers are made publicly available by the Office for National Statistics (ONS) in its monthly Public Sector Finances publication. The data are available in the ONS data series ID MF7A in worksheet PSA9B.