Economists press Bank of England to slow gilt sales as public-finance losses mount

Pressure before the Bank’s decision

Economists and investment specialists are urging the Bank of England to slow or end active sales of government bonds accumulated under quantitative easing. The call comes before the Monetary Policy Committee sets both interest rates and the next annual pace for reducing its gilt portfolio. The immediate development is an intensifying policy dispute: critics say sales are crystallising large taxpayer losses and adding supply to an already strained bond market, while the Bank argues that balance-sheet decisions must serve monetary stability.

The Bank bought government bonds after the 2008 financial crisis and during later economic shocks, financing the purchases by creating central-bank reserves. It began reversing the programme through quantitative tightening in 2022. The portfolio has fallen from a peak of £875 billion to below £490 billion, according to the Guardian, through a combination of bond maturities and active sales back into the market.

Why the Treasury bears the cost

Many bonds were acquired when prices were high and yields were low. Selling them after interest rates rose locks in accounting losses. The Treasury indemnifies the Bank’s Asset Purchase Facility, so those losses ultimately affect public finances rather than remaining solely on the central bank’s books. Official Treasury material confirms that cash began flowing from the government to the facility in October 2022 to cover costs associated with higher rates, redemptions and gilt sales.

The market backdrop has sharpened the argument. The benchmark 10-year gilt yield moved above 5.4% on Monday, while the 30-year yield approached 6%, levels not seen for decades. Higher yields raise future government financing costs. Critics contend that additional Bank sales weaken demand for gilts and increase the pressure, although the magnitude of that effect is contested and other forces—including inflation expectations, energy prices and global bond-market conditions—also influence yields.

Independence and fiscal spillovers

The dispute reaches beyond the mechanics of bond auctions. Some economists want the Treasury to take a more active role because quantitative tightening produces large fiscal consequences. The existing institutional framework, however, stresses the separation of fiscal policy from independent monetary decisions. A 2025 Treasury-Bank memorandum reaffirmed the Bank’s independence and the financial arrangements intended to support its monetary and financial-stability objectives.

The committee is expected to reduce the annual pace of portfolio contraction, but a complete halt to active sales is not assured. The decision will show how much weight policymakers place on market functioning and taxpayer exposure relative to the goal of normalising the Bank’s balance sheet. What matters next is the announced sales target, the division between maturities and auctions, and any explanation of how officials assess effects on gilt yields. A slower programme would ease near-term supply, but it would also leave the public sector exposed to interest-rate risk for longer.