While this is the same pace of reduction as this year, only £13bn of these bonds will be actively sold by the Bank as opposed to being allowed to mature naturally. This compares with roughly £50bn of active sales the previous year. This change to the mix of sales has a significant impact on public finances as it spreads losses from the scheme over a longer period.
Bonds that mature and are not replaced won’t book a loss at all. Also, the interest rate loss disappears.
But OK, assume the loss is the same but just not this year. And?
Rachel Reeves has been urged to restore winter fuel payments for millions of pensioners after the Bank of England handed the Chancellor a fiscal boost worth up to £10bn.
The Bank said on Thursday it would slow down the sales of government bonds amassed during lockdown. The decision will give Ms Reeves more breathing room at next month’s Budget because of the way the scheme is accounted for on the Government’s balance sheet.
Therefore spend the shit out of it? Politics eh? The agreement is that the loss is the same but we still get to spend more. What excellent, excellent, acccounting that is.
Perhaps a more financially astute person than myself could comment on any contrast between this potentially welcome news for Labour and the BoE decision to sell bonds immediately before the 2022 Truss/Kwarteng budget.
Seeing as we live in Clown World, it makes sense that stuff is paid for with Funny Money.
This is like the idiot who banged on my door and demanded that because I could afford to repair my windows, I could *ALSO* afford to pay him to do my gardening. WTF did he think I would pay him with, I’d spent my money ON REPAIRING THE WINDOWS.
“Perhaps a more financially astute person than myself could comment on any contrast between this potentially welcome news for Labour and the BoE decision to sell bonds immediately before the 2022 Truss/Kwarteng budget.”
Yes its instructive that the active QT requirement for 24/25 has been reduced significantly, giving Labour a good deal of extra headroom in their budget as there will be less capital losses on those reduced sales, vs the gilts that the BoE just runs to redemption.
Yet our host tells us that having the BoE outside democratic control means that politics is removed from the management of the country’s money supply…………
@Jim There’s always politics involved.
The BoE is outside of the grubby claws of politicians , which is a very important distinction.
“The BoE is outside of the grubby claws of politicians , which is a very important distinction.”
And its also out of the control of the electorate too…..we can vote the pols out, we can’t vote the BoE out. Whoever control a country’s money controls the country. We’ve seen what the BoE was capable of over Truss’s defenestration, which was in effect a coup. And you’re happy with that? What would you say when a Reform government (swept to power in 2029 on the back of the revulsion of the electorate with all conventional parties and the vagaries of the FPTP system) is chopped off at the knees by the BoE?
Amazingly, the Times app this morning had this story, telling us that the government had more room to spend, immediately above the one saying that debt was now over 100% of GDP for the first time in 60 years
Depends , Jim.
Assuming rainbows and unicorns.. Reform gets elected into a majority, and actually has a working plan to cut into the Blob and significantly decrease expenditure.
There’ll be Screaming galore, but I don’t think the BoE would object to something feasible that would make the country financially healthier.
At least, not without clearly showing the hand they’re playing. Which no doubt they will.. Too many Mates in the Blob..
But I do think Reform will have their chance sooner than 2029. How far they’ll get? That depends on how much of ClownWorld has become apparent to Joe Average, and if he cares enough.
But you might start warning people to keep an eye out for Green/Liberal candidates suddenly retracting their candidacy in …select constituencies…. at opportune moments once the next election comes.
You can bet the French Trick gave people Ideas….
Grikath: «The BoE is outside of the grubby claws of politicians , which is a very important distinction.»
Those were the days. When Kwarteng was replaced by Hunt, the governor of the BoE, Andrew Bailey openly welcomed the new chancellor as being on the same wave-length. This overtly political statement should have seen him fired.