The plummeting value of what once was a lucrative Treasury bond fund could cost £8,900 for every household in the UK.
Figures published in the Treasury’s annual accounts show that a fund called the Asset Purchase Facility, administered by the Bank of England and launched in 2009, has been rapidly eroding in recent years.
The fund, which was valued as a £73.6billion asset on the Government’s balance sheet in 2020, cumulated a loss of £251billion by the close of March 2023.
The losses primarily stem from soaring inflation and interest rates, further exacerbated by the impact of Liz Truss and Kwasi Kwarteng’s disastrous mini-budget that triggered market turmoil last September.
If the entire fund were to be cashed out now and the losses actualised, the liability sum would be equivalent to a cost of £8,900 per UK household, Labour has said.
This represents 76 times the amount of money lost on Black Wednesday in 1992 when the UK was forced out of the Exchange Rate Mechanism.
The money has, however, not actually been lost or paid out – it is just the value of the fund that has plummeted.
The Asset Purchase Facility (APF) was launched in 2009 to support the Bank of England’s quantitive easing programme following the 2008 financial crash. The programme allowed the bank to buy assets from the market to provide a source of cash liquidity and stabilise the economy.
The assets purchased ranged from Government bonds and corporate bonds to pensions – and even things like mortgage-backed securities.
The value of the assets increased when the economy rebounded, after which the then-chancellor George Osborne changed the rules to ensure any gains made from the fund would be directed back to the Treasury.
However, the Treasury acts as an insurer for any losses incurred by this Bank of England fund, placing the responsibility for any financial losses squarely on the shoulders of taxpayers.
Shadow Chancellor Rachel Reeves said in a statement: “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.
In response, economic secretary to the Treasury Andrew Griffith said: “The only black hole facing the British people is the £90billion unfunded spending splurge that Labour would slap on families across the country.
“Meanwhile, we are making progress on the British people’s priorities – halving inflation, growing our economy, and reducing debt.”