As Britain's long-term borrowing costs reach heights unseen since the mid-1990s, a chorus of former central bank policymakers is urging the Bank of England to reconsider how aggressively it dismantles the vast bond portfolio assembled during years of crisis. The question at the heart of this debate is an old and difficult one: when does the unwinding of emergency measures become its own emergency? With Chancellor Rachel Reeves approaching a November budget under considerable fiscal strain, the Bank finds itself navigating the tension between its mandate to control inflation and the broader con
Ex-Bank officials urge slowdown in bond sales to ease UK borrowing costs
The job of the Bank is not to make the chancellor's life easy.
Mark
So the Bank of England is selling off bonds it bought during the crisis. Why would that push up borrowing costs?
Mimi
When you're selling a large amount of bonds into a market that's already nervous, you're adding supply at a moment when demand is weak. That tends to push prices down and yields up—which means the government has to pay more to borrow.
Luke
But the Bank says global factors are the main driver. How much of the yield rise is actually from their bond sales versus Trump's trade war?
Mimi
The Bank admitted last month that its £100 billion programme is playing a role, but they haven't quantified exactly how much. It's clearly a contributing factor, not the whole story.
Mark
What are these former policymakers actually asking for?
Mimi
Four of them are saying the Bank should either slow down the sales significantly or stop active selling altogether and just let bonds mature naturally. One thinks it should stop entirely.
Luke
And the Treasury would save money if they did that?
Mimi
Yes—the IPPR estimates over £10 billion a year if active sales stopped completely. The Bank has been selling at a loss, so fewer sales means less money flowing out.
Mark
But there's a catch?
Luke
There is. The Bank earns less interest on its gilt holdings than it pays out on bank reserves. So holding the bonds costs money in a different way. It's not a clean win.
Mimi
Right. And the Bank's actual job is controlling inflation, not helping the chancellor's budget. These former members are saying a slowdown would be consistent with that, but it's not their primary purpose.
Mark
So what's likely to happen?
Luke
The Bank is expected to signal a slowdown this week, probably to around £70 billion a year. But because fewer gilts are maturing, that might not actually mean fewer active sales—just a lower total target.
Mimi
Which means the relief for Reeves might be less than it sounds.
The Pulse
- UK long-term borrowing costs have surged to 27-year highs, creating a dangerous backdrop for a government already stretched thin ahead of its autumn budget.
- Four former Bank of England policymakers are sounding the alarm, warning that the central bank's £100bn annual bond-selling programme is amplifying volatility in an already fragile gilt market.
- The Bank is expected to signal a slowdown in bond sales this week, but analysts warn that fewer maturing bonds mean any reduction in the headline target may not translate into fewer active sales.
- Halting active bond sales entirely — as the US Federal Reserve and European Central Bank have done — could save the Treasury more than £10bn a year, though structural costs would remain.
- The Bank's own credibility hangs in the balance: any perceived accommodation of Treasury pressures risks undermining its independence and its inflation-fighting mission.
As Britain's long-term borrowing costs reach heights unseen since the mid-1990s, a chorus of former central bank policymakers is urging the Bank of England to reconsider how aggressively it dismantles the vast bond portfolio assembled during years of crisis. The question at the heart of this debate is an old and difficult one: when does the unwinding of emergency measures become its own emergency? With Chancellor Rachel Reeves approaching a November budget under considerable fiscal strain, the Bank finds itself navigating the tension between its mandate to control inflation and the broader consequences of its actions on the cost of governing a nation.
Andrew Bailey is facing calls from four former Bank of England policymakers to slow the central bank's systematic unwinding of its crisis-era bond purchases — a process that has shed roughly £100 billion in government gilts over the past year alone. With around £560 billion still held in a portfolio largely bought at prices well above current market values, the programme is contributing to borrowing costs not seen since the mid-1990s.
Chancellor Rachel Reeves is heading into a November 26 budget with the economy under strain. The Bank has acknowledged its bond sales are adding pressure to gilt yields, while also pointing to global factors — trade tensions and concerns about Federal Reserve independence — as significant drivers. This week, as it holds its base rate steady at 4 percent, it is expected to signal a more cautious approach to future sales.
Michael Saunders of Oxford Economics warned that pressing on at the current pace risks pushing yields higher at precisely the wrong moment. Sushil Wadhwani, who served on the monetary policy committee in the late 1990s, went further, calling for active sales to stop entirely and for the Bank to rely only on bonds maturing naturally — noting that foreign investors regularly cite the 30-year gilt yield as a barometer of Britain's economic credibility.
City analysts broadly expect the Bank to reduce its annual target to around £70 billion, though the arithmetic is tricky: fewer bonds are maturing in the year ahead, meaning that target could still require active selling at current levels. Andrew Sentance endorsed the reduction as sensible but offered a pointed reminder that the Bank's duty is to control inflation, not to ease the Chancellor's path.
The fiscal stakes are real. The IPPR estimates that halting active sales entirely could save the Treasury more than £10 billion annually. Yet the underlying cost — the gap between what the Bank earns on its gilt holdings and what it pays on commercial bank reserves — would persist regardless. A positive manufacturing survey offered Reeves a rare moment of relief, but the more consequential signal will come from the Bank itself in the days ahead.
Andrew Bailey faces pressure from four former Bank of England policymakers to pump the brakes on a bond-selling programme that is helping to drive Britain's borrowing costs to their highest level in nearly three decades. The central bank has been systematically unwinding the crisis-era purchases it made during the financial collapse, a process known as quantitative tightening. Over the past year alone, it has shed roughly £100 billion in government bonds—some through active sales, others by allowing maturing debt to simply expire without replacement. The remaining portfolio still holds about £560 billion in gilts, most of which were purchased at prices far higher than their current market value.
Chancellor Rachel Reeves is heading into an autumn budget on November 26 with the economy under strain and long-term borrowing costs now at levels not seen since the mid-1990s. The Bank of England has acknowledged that its bond-selling programme is contributing to the pressure on gilt yields, though it has also pointed to global headwinds—trade tensions under Donald Trump and concerns about Federal Reserve independence—as major drivers. This week, as the Bank prepares to hold its base rate steady at 4 percent, it is expected to signal a slowdown in how aggressively it will sell bonds over the coming year.
Michael Saunders, who served on the Bank's monetary policy committee and now works at Oxford Economics, argues that market conditions demand restraint. "The gilt market and bond market in general are weak and volatile," he said, warning that continuing to sell bonds at the current pace could push yields even higher at a moment when stability matters most. A second former MPC member, speaking anonymously, was blunter: reducing the pace of sales is not optional but essential, given the turbulence rippling through global bond markets. Sushil Wadhwani, who sat on the committee in the late 1990s and early 2000s, went further, calling for the Bank to stop active sales altogether and rely only on bonds maturing naturally. He noted that foreign investors regularly raise concerns about the 30-year gilt yield with him, suggesting that the cost of long-term borrowing is shaping perceptions of Britain's economic health.
City analysts broadly expect the Bank to scale back its quantitative tightening to around £70 billion annually. The catch is that fewer gilts are maturing in the year ahead, which means maintaining that £70 billion target would actually require the Bank to keep selling bonds at current levels rather than reduce active sales. Andrew Sentance, another ex-MPC member, endorsed a reduction to £70 billion as sensible and aligned with market expectations, but cautioned Reeves against treating any slowdown in bond sales as a gift to the Treasury. "The job of the Bank is not to make the chancellor's life easy," he said. "Its job is to control inflation."
The potential savings are substantial. A think tank called the IPPR has estimated that halting active sales entirely—matching the approach taken by the US Federal Reserve and the European Central Bank—could save the Treasury more than £10 billion per year. The Bank has been selling bonds at a loss, so reducing those sales would ease the drain on public finances. Yet there is no free lunch: holding onto the bonds means the Bank earns less interest on its gilt portfolio than it pays out on the reserves held by commercial banks, a structural cost that would persist regardless of the pace of sales.
For Reeves, the timing is awkward. A manufacturing survey from the trade body Make UK offered a rare piece of good news, suggesting that output and export orders rose in the third quarter after months of uncertainty. But the chief executive cautioned against reading too much into a single positive indicator, noting that UK and European markets remain sluggish. The real test comes in the weeks ahead: whether the Bank signals a meaningful shift in its bond-selling strategy, and whether that shift is enough to ease the pressure on gilt yields before Reeves must present her budget and explain how the government will manage its borrowing.
Notable Quotes
The gilt market and bond market in general are weak and volatile. Current conditions are such that a higher pace of active sales might have an undesirable effect on pushing up yields further.— Michael Saunders, former MPC member
The job of the Bank is not to make the chancellor's life easy. Its job is to control inflation.— Andrew Sentance, former MPC member
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Economy & Finance