Government pays Bank of England record amount for bond losses

The government pays the Bank of England the most money to cover bond losses.

Last month, the government gave a record amount of money to the Bank of England because rising interest rates made the Treasury lose much money from quantitative easing (QE).

In July, the Treasury gave the Bank the most significant single-state transfer in history to make up for the shortfall in the monetary stimulus plan after the global financial crisis.

The Office for National Statistics says that the losses from the Bank of England's quantitative easing have cost the government almost £30bn in the last 11 months.

The amount in July is £5.4bn more than the Office for Budget Responsibility thought it would be in March.

The data kills any dreams of tax cuts in the Budget for next year, even though other data shows that the public sector borrowed £11.3bn less than expected in the three months leading up to July.

QE affects the state finances because the Bank used the £875bn it created between 2009 and 2021 to buy UK government bonds.

Between 2009 and 2022, the programme saved the government about £120bn, but things have changed since interest rates went above 1.75pc last year.

According to the Bank of England's estimates, the government will have to send the Bank about £220 billion in the seven years leading up to 2030.

It is estimated that quantitative easing will cost the government a total of £150 billion throughout its existence.