Rishi Sunak ‘wasted £11bn by paying too much interest’ on UK debt

Rishi Sunak has been accused of wasting £11bn of taxpayers’ money by paying too much in interest servicing the government’s debt.

The National Institute of Economic and Social Research (NIESR) said the losses were the result of the chancellor’s failure to insure against interest rate rises on £900bn of reserves created through the quantitative easing (QE) programme.

The losses were said to exceed the amount that the Conservatives have accused former chancellor Gordon Brown of losing when he sold some of the UK’s gold reserves at rock bottom prices.

The institute’s director, Prof Jagjit Chadha, told the Financial Times that Sunak’s actions had left the country with “an enormous bill and heavy continuing exposure to interest rate risk”.

Labour said the losses were “astronomical” and accused the government of “playing fast and loose” with the public finances.

In response, the Treasury said that it had a “clear financing strategy” in place to meet the government’s funding needs.

According to the FT report, the Bank of England (BoE) created £895bn of money through the QE programme, most of which was used to buy government bonds from pension funds and other investors.

When those investors put the proceeds in commercial bank deposits at the BoE, the Bank had to pay interest at its official interest rate.

Last year, when the official rate was still 0.1%, the NIESR urged the government to insure the cost of servicing this debt against the risk of rising interest rates by converting it into government bonds with longer maturity.

Chadha said they had now calculated that Sunak’s failure to heed their advice – despite having regularly warned about the risks of higher inflation and interest rates on the costs of servicing the government’s debt – had cost taxpayers £11bn.

The shadow Treasury minister, Tulip Siddiq, said: “These are astronomical sums for the chancellor to lose, and leaves working people picking up the cheque for his severe wastefulness while he hikes their taxes in the middle of a cost-of-living crisis.

A Treasury spokesperson said: “There are longstanding arrangements around the asset purchase facility – to date £120bn has been transferred to HM Treasury and used to reduce our debt, but we have always been aware that at some point the direction of those payments may need to reverse.

“We have a clear financing strategy to meet the government’s funding needs, which we set independently of the Bank of England’s monetary policy decisions.

“It is for the monetary policy committee to take decisions on quantitative easing operations to meet the objectives in their remit, and we remain fully committed to their independence.”

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