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  • 2022-10-17 (xsd:date)
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  • Bank of England did not sell £80 billion in gilts shortly before mini-Budget (en)
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  • The Bank of England sold some £80bn of gilts at the same period as the chancellor's mini-Budget. The Bank of England did not sell any gilts during this period. The £80 billion figure refers to the amount by which the Bank is projected to reduce its holdings of government bonds over the next year, through a combination of planned gilt sales and maturing bonds. Add to that the Bank's sale of some £80bn of gilts at the same period as the Chancellor's mini-budget further destabilising the markets and one is sadly bound to conclude a critical lack of coordination between Treasury and the Bank. In a column published by the Daily Express, in print and online, Conservative MP Sir Iain Duncan Smith claimed that the Bank of England sold some £80 billion of gilts around the time of former chancellor Kwasi Kwarteng’s mini-Budget announcement. While the Bank’s announcement it would sell gilts may have contributed to instability, Full Fact has confirmed that the Bank of England has not yet sold any gilts. The £80 billion figure used by Sir Iain yesterday, 13 October, instead refers to the amount by which the Bank is projected to reduce its holdings of gilts over the next year when it begins selling gilts at the end of this month, though not all of this figure will be accounted for by sales. Stay informed Be first in line for the facts – get our free weekly email Subscribe Gilts are what government bonds are called in the UK. The government issues them for sale to raise money. A bond works similarly to an IOU. It returns a fixed amount of interest each year and, at the end of the lifetime of the bond, the bond ‘matures’ and the initial money paid is returned to the bond holder. The Bank of England currently holds approximately £838 billion in gilts. On 22 September, the day before the mini-Budget statement, it confirmed that it would begin selling some of these in order to reduce the number of government bonds it holds. The Bank’s gilt holdings increased significantly over the past 13 years as it bought large quantities of these bonds to stimulate the economy during the global financial crisis and the Covid-19 pandemic —a monetary policy known as quantitative easing. The Bank is now beginning the process of reversing this policy. This programme is scheduled to begin on 31 October, having initially been scheduled to begin in the first week of the month. Over the following 12 months, maturing bonds and sales of gilts combined are projected to come to £80bn, with gilt sales accounting for roughly half of this amount. Following the mini-Budget, and before these sales started, the Bank announced that it would actually begin carrying out temporary purchases of gilts, in order to restore orderly market conditions after a fall in government bond prices, which has been linked by many to the government’s mini-Budget announcement. Since the beginning of the operation, which concludes today, 14 October, the Bank has purchased a total of £10.7 billion in gilts. Sir Iain’s claim was made as part of a wider argument suggesting that a lack of coordination between the Bank of England and the government contributed to a destabilising of the markets. The Bank confirmed its plan to begin selling gilts —essentially selling on government debt— shortly before the chancellor’s mini-Budget announcement, which was widely expected to lead to an increase in government debt. Some experts have suggested that these plans have been perceived as contradictory, leading to market uncertainty. Currency strategist Jane Foley told the BBC: They're worried that some of these tax cuts that have been announced aren't going to be fully funded. That will result in a large amount of debt at a time when the Bank of England is going to be selling some of its holdings of UK government debt. So while Sir Iain was wrong to claim gilts had been sold, there’s some justification in arguing that just the announcement of the sell-off may have contributed to market instability. Full Fact has contacted Sir Iain and the Daily Express for comment. Image courtesy of Richard Townshend (en)
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