The Labour Party claims a Treasury fund originally designed to profit from the Bank of England’s quantitative easing programme has turned from a £73.6 billion asset into a £177.6 billion liability in the space of just three years.
The black hole in the Treasury’s bond fund began to appear during Rishi Sunak’s term as Chancellor, but dramatically increased in size as a result of the economic crash triggered by last September’s ‘Kamikaze Budget’.
According to the Treasury’s latest statement of its ‘group financial position’, the fund went from being the biggest asset on its balance sheet in March 2020 to its biggest liability at the end of March 2023, thanks to the £251 billion decline in its value.
That is equivalent to 10 per cent of the UK’s gross domestic product in 2022, or the entire GDP of Scotland and Wales combined. In spending terms, it would pay for the running costs allocated by central government last year to every school and police force in England, every branch of the armed forces, and the whole of NHS England.
In terms of losses for the taxpayer, it represents a cost of £8,900 for every household in the UK and is 76 times the amount that was lost by a previous Tory government during the exchange rate chaos of Black Wednesday in 1992.
As a result of these losses, the Treasury’s calculation of the returns that the taxpayer has made over the total lifetime of the fund has also shifted from a £128 billion net profit at the end of March 2021 to a £58.8 billion net loss at the end of March 2023.
As recently as July 2021, when Rishi Sunak was Chancellor, the Treasury’s annual report for 2020/21 dismissed the prospect of the taxpayer facing a net loss over the lifetime of the Treasury’s bond fund as a “remote possibility”.
The figures were slipped out in the Treasury’s annual accounts for 2022/23, one of 108 ‘transparency’ publications issued by the government on 20 July to coincide with the start of the Parliamentary recess and the three by-elections held on that day.
Rachel Reeves MP, Labour’s Shadow Chancellor, said: “Families are already feeling the squeeze from what feels like an endless Tory cost of living crisis. Now they face yet another hit thanks to the Conservatives’ catastrophic mistakes in managing this fund. This Tory bond black hole will land working people with another astronomical bill for years to come.
“And it leaves them paying the price for the failings of successive Tory Chancellors: the hubris of George Osborne thinking this fund was a one-way bet, the complacency of Rishi Sunak ignoring the warning signs in the bond market, and the recklessness of Kwasi Kwarteng turning a crisis into a disaster.
“All of them are guilty of putting their short-term political ambitions ahead of the long-term economic interests of the country. That will only change when we have a Labour government in place, determined to rebuild the foundations of economic responsibility, and give Britain the more secure, more resilient economy it needs.”
We have asked the Treasury and the Conservative Party for a response and will add this in when it is received.
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