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Bank of England's Bond Sales Strategy Costs Taxpayers £36 Billion Over Four Years

The Bank of England's strategy of actively selling government bonds has cost taxpayers £36 billion over four years, according to Deutsche Bank analysis.

Asude Karataş • 9 Haziran 2026 11:01 • 3 dk okuma • 40 görüntülenme

The Bank of England's contentious approach to reducing its government bond holdings has resulted in a £36 billion cost to taxpayers across four years, new analysis from Deutsche Bank has revealed. The central bank's decision to actively sell UK government debt—rather than allow bonds to mature—has crystallized substantial losses for the public amid a sharp decline in bond prices. The figures underscore mounting concerns over UK public finances, with national debt projected to reach £3 trillion by September.

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How the Bond Sales Strategy Works
Political and Economic Implications

How the Bond Sales Strategy Works

The Bank of England holds an £875 billion stockpile of government bonds accumulated during the financial crisis and COVID-19 pandemic. While most major central banks globally allow such holdings to mature without reinvestment, the Bank of England stands alone among leading monetary authorities in actively selling bonds before maturity. This approach immediately crystallizes losses, transferring billions of pounds in costs to taxpayers.

According to Deutsche Bank's assessment, the central bank is selling gilts—the term for UK government bonds—at discounts reaching 50 percent. Higher inflation and growing political uncertainty have driven up yields on long-term UK debt to their highest levels since 1998, pushing down bond prices and multiplying losses. Losses on bonds maturing beyond 20 years alone total approximately £22 billion since sales began in 2022, with short-term bonds accounting for £5.6 billion in losses and mid-range gilts contributing roughly £8 billion.

Political and Economic Implications

Sanjay Raja, chief UK economist at Deutsche Bank, noted that the overall taxpayer cost of the bond-buying program has increased by £13 billion since March alone, following geopolitical tensions that raised interest rate expectations. Economists have argued that Chancellor Rachel Reeves could avoid transferring billions to the Bank of England if the institution ceased active gilt sales. Some prominent voices have warned that rapidly rising public debt could force the Labour government to seek assistance from the International Monetary Fund.

The contentious policy has drawn criticism across the political spectrum. Central bank officials contend that reducing bond holdings remains necessary, yet the timing and method of those reductions—coupled with unfavorable market conditions—have magnified losses. The divergence between the Bank of England's approach and that of global peers raises questions about whether alternative strategies might have minimized taxpayer exposure.

Why does the Bank of England actively sell bonds instead of letting them mature?+

The Bank aims to reduce its £875 billion gilt stockpile accumulated during the financial crisis and pandemic. While most central banks allow bonds to mature naturally, the Bank of England chose active sales as part of its quantitative tightening strategy to reduce its balance sheet and normalize monetary policy.

How did bond prices fall so sharply?+

Rising inflation and higher interest rate expectations pushed up yields on UK government debt to levels not seen since 1998. When yields rise, existing bond prices fall inversely, meaning the Bank receives less when selling older bonds into the market. The central bank has sold some gilts at discounts up to 50 percent.

What is the £36 billion figure measuring?+

Deutsche Bank calculated the cumulative losses incurred by the Bank of England selling government bonds below their purchase price over the four-year period since active sales began in 2022. These losses ultimately represent costs borne by taxpayers, as the losses reduce the Bank's profits transferred to the government.

Could the UK government have avoided these losses?+

Yes, according to economists. If the Bank of England had allowed bonds to mature naturally rather than selling them early—the approach used by most other central banks—it would have avoided crystallizing losses during periods of rising yields and falling bond prices.

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