The Bank of England’s bond trading has cost the country almost £100billion in the last three years, with the OBR (Office for Budget and Responsibility) forecasting billions more in losses, GB News can reveal.The exclusive report from think tank Facts4EU in collaboration with Stand for Our Sovereignty reveals the extent to which Chancellor Rachel Reeves is hemmed in months after she announced a tax-heavy budget.To understand how we got here, the report examines the central bank’s most recent losses in the three years from 2023-2025.
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The story starts with the most recent losses, in the three years from 2023-2025As all of the Bank’s “Asset Purchase Facility” is fully underwritten by HM Treasury, so the poor old taxpayer was forced to take the hit. There is nothing that can be done here – the damage is done. The chart above demonstrates very dramatically what has happened since the Bank started losing money, at the end of 2022.£100 billion has been lost in the last three years.We have deliberately simplified this report to be understood by everyone. Something this big should not be confined to economists to argue over. Going forward, we will generally refer to “the Bank”, meaning the Bank of England on Threadneedle Street in London.How has the Bank of England lost the money?The Bank buys too many bonds at over-inflated pricesSeparately it puts up interest rates to control the inflation it has createdThe prices of bonds crashThe Bank starts selling its bonds at huge losses and sends the bill to the taxpayers, via HM TreasuryAnd is this confined to the UK? In short, yes. Both the US Federal Reserve (“the Fed”) and the EU’s European Central Bank (“the ECB”) also misjudged their bonds, but neither institution has been selling at a loss like the Bank of England.As ever, Lord Redwood sums up the situation in its grim detail: “Yes, the story here is the huge losses. The Bank bought too many bonds at over-the-top prices, paying more for them than they will get back when they repay.“They then increase the losses by dumping them in the market at even larger losses which no other Central Bank is doing.“They pay the commercial banks who lend them the money to buy the bonds more in interest than they get on the bonds.”The figures on which both charts in this report are based are taken directly from the information given by the Office for Budget Responsibility (OBR) to the Chancellor, Rachel Reeves, when she was formulating her November budget. She is obliged to rely on their forecasts.LATEST DEVELOPMENTSNeil Oliver uncovers ALARMING Covid vaccine truths from Pfizer’s own documents: ‘See for yourself!’Reform’s real enemy at the ballot box is not Labour – Adam BrooksLabour fights to defend three seats from Reform UK in key by-election battles across BritainThe chart below shows the Bank is forecast by the OBR to lose EVEN MORE taxpayer moneyThe OBR forecasts the Bank’s cumulative losses to amount to £288billion 10 years from now.A debate is currently raging on the value of the OBR as a body, and of the role it plays in determining the Chancellor’s decision-making when it comes to her Spring and Autumn statements.That is a subject for another day, however. For the moment we are showing what the Chancellor looks at from the OBR, in terms of the Bank’s projected losses over the remainder of this Parliament, and beyond.If this is about bonds, what is a bond?A government bond is commonly referred to as “a gilt” but we will simply use the most common expression, a bond. The government borrows from investors, so a bond is a form of loan.The Government promises to pay interest on the bond and to repay the bond on a specified date. If the investor does not want to wait for repayment, they can sell their bonds (their part of the government’s overall loan) to someone else at the market price. This is usually less than the money they would get back if they held onto it until its ‘maturity date’, when they get repayment.In effect, the Bank bought up a lot of state debt when they had to pay considerably more than the original loan value as a result – counter-intuitively – of low interest rates. This is how one loss was created. They then increased the losses by dumping them in the market at even larger losses. This is something neither the Fed or the ECB is doing.The third part of the loss is paying the commercial banks who lend them the money to buy the bonds more in interest than they get on the bonds.Summarising the three ways the Bank is losing money: Holding their bonds to maturity (repayment date) and getting less back than purchase priceSelling bonds now and losing much more money on them. Holding them for longer could reduce losses significantlyThe Bank pays the commercial banks more in interest than the interest the state pays them on the bonds.Lord Redwood said: “At a time when the UK state is borrowing and spending too much the last thing we need are large losses from The Bank of England.“The Bank should be embarrassed by being one of the world’s worst bond traders, piling up losses for the Treasury to bail out.“Buying the bonds was a joint decision of Bank and Treasury, with taxpayers granting a guarantee against loss.“The Chancellor should pick up the phone, tell the Governor the bills he sends her are too large and ask him to cut them.”So what can and should be done? For obvious reasons there is nothing the Bank can do about No.1 aboveSelling bonds early seems very ill-advised and should be stoppedThe Bank could simply pay the commercial banks less interest, saving a great deal each yearIt is not often that we give an example of the EU working smarter than the UK, but the ECB has very sensibly decided to pay commercial banks less interest on their bonds. The Bank should simply follow the ECB’s example and thereby save a lot of taxpayer money.Our Standards:
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