Former Bank of England policymakers have called on governor Andrew Bailey to ease pressure on the government’s borrowing costs by reducing or halting its bond-selling programme. Four influential ex-members of the Bank’s monetary policy committee (MPC) said action was needed as Britain’s long-term borrowing costs hit a 27-year high, ahead of Chancellor Rachel Reeves’ 26 November autumn budget.
While global factors, including Donald Trump’s trade war and tensions over the US Federal Reserve, have pushed yields higher, the Bank acknowledged that its £100bn programme of quantitative tightening (QT) is contributing. The central bank is expected to hold interest rates at 4% but could signal a slowdown in bond sales over the next year.
Michael Saunders, a former MPC member, said the current pace of sales could undesirably push up yields further, while another ex-member stressed the programme must be reduced to reflect global market conditions. The Bank’s QE holdings peaked at £895bn and have now shrunk to around £560bn, with active sales and maturing debts reducing the portfolio by about £100bn over the past year.
Sushil Wadhwani, MPC 1999–2002, called for a halt to active sales and a switch to passive QT, arguing that 30-year gilt yields significantly affect confidence in the UK economy. Andrew Sentance, another ex-member, agreed that trimming QT to around £70bn was reasonable but warned that the Bank’s role is inflation control, not easing fiscal pressure.
The IPPR thinktank estimates that stopping active sales could save the Treasury over £10bn annually, though keeping bonds incurs costs because the Bank earns less on gilts than it pays on commercial bank reserves. Economists have also suggested lowering interest on reserves or taxing banks’ windfall profits as complementary measures.
