A Neat Way to Get Rid of the UK's National Debt?

posh*spice

Bank of England hands QE income to Treasury



The Bank of England has said it will hand over to the Treasury the interest it earns on government debt it holds due to its quantitative easing policy.
The Bank holds £24bn cash from payments on the £375bn in gilts it holds, a total expected to reach £35bn by March.
The transfer will cut the government's borrowing needs and the net debt it reports in its financial accounts.

http://www.bbc.co.uk/news/business-20268679

HAMISH_MCTAVISH

This was always going to happen.

One branch of the UK state apparatus, the BOE, now owns more than a third of all outstanding UK government debt.

The treasury pays interest on the debt to the BOE, who then hand it back to the Treasury.

It's not quite a free lunch, but its damn close.

PaulF81

Yep, and the best way to make the national liabilities to the bank disappear. The BOE know it will not cause inflation as the inflation has already happened. To house prices, which is why we have such a large liability to the banks.

Good job we weren't in Europe though. Germany would have most certainly had its pound of uk flesh.

Mr_Mumble

HAMISH_MCTAVISH wrote: »

It's not quite a free lunch, but its damn close.

It's nothing of the sort. The best possible spin is to say it's an efficient accountancy trick that reduces deficits in the short-term while keeping the debt load similar in the long-term. That's the best spin however, others aren't as charitable:

Telegraph - The Bank of England has just crossed the line into straight government financing

zygurat789

Since the BoE is not benefitting from the £350bn could they not be persuaded to give that back to the treasury and reduce the national debt further.

GeorgeHowell

Since the Bank of England is a wholly owned subsidiary of HMG, what's the big deal ?

posh*spice

zygurat789 wrote: »

Since the BoE is not benefitting from the £350bn could they not be persuaded to give that back to the treasury and reduce the national debt further.

Maybe in time?:cool:

posh*spice

Mr_Mumble wrote: »

Telegraph - The Bank of England has just crossed the line into straight government financing

Ha Ha this made me laugh

It's as if Osborne has died and been reborn as Gordon Brown,

Oh dear Jeremy lost his nerve in the end.....must have had a phone call from someone?

posh*spice

Economists said the changes could have significant long-term implications. Marc Ostwald of Monument Securities said it showed "just how desperate Osborne was" to find funds, even though most of the money will probably be transferred back to the Bank when QE is unwound.
"It blurs the divide between fiscal and monetary policy even more, and some may well say that this is tantamount to monetising the deficit," he added.

http://www.guardian.co.uk/business/2012/nov/09/bank-of-england-gilts-interest

posh*spice

George ‘Masterchef’ Osborne cooks the books again If cooking the books was a graded skill, George Osborne would get a Michelin Star.

http://blogs.spectator.co.uk/coffeehouse/2012/11/george-masterchef-osborne-cooks-the-books-again/?utm_source=rss&utm_medium=rss&utm_campaign=george-masterchef-osborne-cooks-the-books-again

Graham_Devon

Not going to pretend to understand it all completely, but from what I gather, is this not just borrowing even more from the future? As he articles state, the treasury will simply be getting money up front, but this will need to be reversed at a later date.

Or will it simply not be reversed and the QE never unwound?

This simply allows us to kick the can a little further, reducing the need to hit targets through spending reductions and / or tax increases...for a couple of years....by which point, the "problem" will be even bigger.

Targets shouldn't be hit in this way, in my mind, it's immoral...what's the point in the target? I like how the government say's it's ok....were only aligning ourselves with Japan :eek:

Imagine suggesting this sort of thing in 2007. It would have been seen as absolutely bonkers. Any losses on the bond purchases will now have to be met by the taxpayer rather than the interest buffer on the bonds.