Estimates by the National Institute for Economic and Social Research, the UK’s oldest non-partisan economic research institute, show that the losses stem from the chancellor’s failure to insure against year-over-year interest rate hikes in reserves of around 900 900 billion. created by a process of quantitative easing. The loss to taxpayers is more than the Conservatives have accused former Labor Chancellor and Prime Minister Gordon Brown of costing the UK between 2003 and 2010 when he sold some of the country’s gold reserves at low prices. Jagjit Chadha, director of Niesr, said Sunak’s decisions had hit the UK with “a huge bill and a lot of constant exposure to interest rate risk”, adding that it was the Treasury Department’s fault. “It would have been much better if the scale of short-term liabilities, as we have argued for some time, had been reduced earlier, and we would have reaped the benefits of longer-term debt issuance,” he said. The Treasury Department said: “We have a clear funding strategy to meet the Government’s financing needs, which we have set independently of the Bank of England monetary policy decisions.” Under the QE program, the Bank of England raised 95 895 billion in cash and used most of the cash to buy government bonds from pension funds and other investors in the financial markets. When these investors put the proceeds in commercial bank deposits with the BoG, the central bank had to pay interest at its official interest rate. Last year, when the official interest rate was 0.1%, Niesr advised the government to insure the cost of servicing this debt against the risk of rising interest rates by converting it into longer-term government bonds. “There is a good chance we will consider adjusting the balance sheet now that interest rates are still low,” Niesr wrote last summer. The government’s failure to act, despite Sunak regularly warning of the risks of higher inflation and interest rates on government debt service costs, has now cost taxpayers 11 11 billion, Chadha said. The Ministry of Finance is responsible for managing the details of the QE. Although the BoG decided how much to implement QE, it acted as a government agent in the technical implementation of the program.

The BoE is expected to raise interest rates from 1 percent to 1.25 percent next week and could even follow the Federal Reserve in implementing a 0.5 percentage point increase to tackle the UK inflation problem. Consumer prices were 9 percent higher in April than last year, the highest in the G7, and inflation is expected to rise above 10 percent in the fall. With the UK’s nearly ισ 500 billion in public debt-related debt, debt service costs are projected to increase from ,5 53.5 billion in 2021-22 to 83 83 billion 20 in 2022-23. This increase is largely due to higher inflation, but also reflects rising interest rates, increasing the net cost of the QE program for taxpayers. Since its release in 2009, QE has significantly reduced the overall cost of servicing public debt, while interest rates have remained close to zero, but will save much less money as interest rates rise. The Office for Budget Responsibility, the UK’s watchdog, said one of the biggest risks to the UK’s public finances is exposure to interest rate risk, as QE reduces the actual maturity of public debt. “Much of the impact of higher interest rates on public finances is now coming quite quickly,” the OBR warned last year in its fiscal risk report.