The Government transferred a record £14.3 billion to the Bank of England last month as increases in interest rates left the Treasury with heavy losses from quantitative easing (QE).
The record transfer was needed to meet the shortfall from the monetary stimulus programme put in place after the global financial crisis.
Losses on the Bank of England’s quantitative easing measures have cost the taxpayer almost £30 billion in the past 11 months, according to the Office for National Statistics, while July's figure is £5.4 billion more than forecast by the Office for Budget Responsibility in March.
The figures dashed hopes of tax cuts in next year’s Budget, which were raised by separate data showing public sector borrowing was below forecast in July.
The BoE began using QE in response to the global financial crisis, amassing bond holdings of £895 billion between 2009 and 2022 in order to boost the economy when interest rates were already at record lows.
It is a controversial tool which saved the Government around £120 billion during that period but those early profits have turned into losses as interest rates have risen sharply.
The Bank of England’s own projections show the taxpayer will need to transfer about £220bn to the Bank in the seven years to 2030 alone.
The BoE is indemnified against losses on the QE programme under an agreement signed with the Treasury in 2009, intended to ensure that monetary policy is not constrained by the implications for the central bank’s balance sheet.