UK Treasury Bond Fund Losses Cause Significant Household Burden, Labour Reveals
The UK Treasury bond fund, initially designed to benefit from the Bank of England’s quantitative easing initiative, has transformed from an asset to a liability, leading to substantial losses that now burden each UK household with approximately £8,900, according to the Labour party.
Over the past three years, the fund has experienced a rapid decline, resulting in a staggering £251 billion loss by March 2023, making it the most significant liability on the Treasury’s balance sheet.
Labour Highlights Dramatic Decline of Treasury Bond Fund
The Labour party underscores the alarming deterioration of the Treasury bond fund, which has now become a substantial liability on the Treasury’s financial record.
This dramatic decline has led to a loss of £251 billion, positioning it as the most significant liability by the end of March 2023.
These losses are equivalent to a cost of £8,900 for every UK household, a figure that surpasses the losses incurred during the infamous Black Wednesday in 1992.
Comparisons and Consequences of the Losses
Labour draws attention to the magnitude of the losses, comparing them to historical events and economic indicators.
The party highlights that the losses amount to 76 times the amount lost on Black Wednesday, a pivotal moment in the UK’s economic history.
Moreover, these losses are equivalent to 10% of the UK’s GDP in 2022, which is comparable to the combined GDP of Scotland and Wales.
These figures underscore the seriousness of the situation.
Labour’s Critique and Proposed Solutions
Shadow Chancellor Rachel Reeves criticizes the Conservative party’s management of the fund, attributing the losses to a series of mistakes and short-term political ambitions.
She points out that these losses will inevitably affect working people and create a financial burden for years to come.
Labour asserts that a change in government leadership is necessary to rebuild economic stability and resilience.
Change in Treasury’s Assessment
Labour highlights a shift in the Treasury’s assessment of taxpayer returns associated with the fund.
The initial projection of a net profit of £128 billion by March 2021 has been revised to a net loss of £58.8 billion by March 2023, further emphasizing the downward trajectory of the fund’s performance.
Origins and Purpose of the Fund
The Asset Purchase Facility (APF), established in 2009 as part of the Bank of England’s efforts to address the financial crisis, aimed to stimulate the UK’s economic recovery.
By acquiring Government bonds and other assets from financial institutions, the APF aimed to infuse liquidity into a stagnant market.
While the fund initially experienced success as the economy rebounded and interest rates remained low, it has since faced significant challenges.
Labour’s Historical Critique
Labour points out a significant decision made by former Tory chancellor George Osborne in 2013.
Osborne altered the APF’s rules, redirecting future profits from the Bank of England’s investments to the Treasury.
At that time, Rachel Reeves, who was a shadow Treasury minister, warned against this short-term approach, advocating for a comprehensive strategy to stimulate job creation and economic growth.
Publication of Figures and Government Response
The figures concerning the Treasury bond fund’s losses were published in the Treasury’s annual accounts for 2022/23.
In response to Labour’s critique, Treasury minister Andrew Griffith defended the government’s financial priorities and accused Labour of proposing an unfunded spending splurge that would burden families.
He emphasized the government’s efforts to tackle inflation, promote economic growth, and reduce debt.
In this report, Labour sheds light on the troubling decline of the UK Treasury bond fund, which has shifted from an asset to a significant liability, causing substantial losses that now burden UK households.
The party criticizes the Conservative party’s management of the fund, asserting that a change in leadership is necessary to rebuild economic stability.
