Rishi Sunak has been alleged of deteriorating billions of dollars servicing government debt.
Rishi Sunak has been accused of failing to act quickly enough to save £11 billion in taxpayer money used to pay interest on government debt.
According to the National Institute of Economic and Social Research (NIESR), the losses were caused by the chancellor’s failure to insure against interest rate increases.
It meant making larger-than-necessary payments on the £900 billion in reserves created by the quantitative easing (QE) programme.
The Treasury stated that it was the Bank of England’s responsibility to decide on QE measures.
According to Prof Jagjit Chadha of NIESR, Mr Sunak’s actions have left the country with “an enormous bill and heavy continuing exposure to interest rate risk.”
The Bank of England created £895 billion in new money.
When the official rate was still 0.1 percent last year, NIESR stated that the government should have insured the cost of servicing this debt against the risk of rising interest rates.
It stated that interest payments have “now become much more expensive,” and it estimates a loss of around £11 billion over the last year.
“Such a missed opportunity is an unnecessary cost to the public finances at a time when they are already stretched thin,” the think tank said.
It proposed converting the debt into government bonds with a longer repayment period.
“It would have been far preferable to have reduced the scale of short-term liabilities earlier, as we have argued for some time, and to have taken advantage of the benefits of longer-term debt issuance.” “This is a question for the Treasury to answer,” Prof Chadha said.
Gerard Lyons, Boris Johnson’s former chief economic adviser when he was Mayor of London, tweeted that the situation was “all too predictable.”
Dr. Lyons, now a senior fellow at the Policy Exchange think tank, believes the UK should have “locked in low rates, borrowed more long-term debt, and not relied too heavily on QE to fund the deficit.”
“These are astronomical sums for the chancellor to lose,” Labour’s shadow treasury minister Tulip Siddiq said.
