Treasury rejects claims Sunak wasted £11bn
THE Treasury has rejected claims that Rishi Sunak wasted £11bn by failing to shield taxpayers against rising borrowing costs.
Interest payments on the national debt are on track to hit a record high of £83bn this year. However, a Westminster think tank said on Thursday that the Chancellor could have saved billions by switching to longer-terms bonds last summer when rates were low.
City minister John Glen hit back yesterday, arguing that the think tank’s plans would “come with huge economic risks and could undermine the Bank of England’s independence”.
The National Institute of Economic and Social Research told the Financial Times that Mr Sunak’s failure to act had “an enormous bill and heavy continuing exposure to interest rate risk”.
It said: “Such a lost opportunity is an unnecessary cost to the public finances at a very difficult time”.
Jagjit Chadha, the group’s director, estimated the Treasury would be £11bn better off now had it made the change.
However, the institute’s argument drew scepticism from other economists and analysts, and a rebuttal from senior Conservatives.
Mr Glen said: “The proposals are complicated and involve forcing banks to swap reserves for longer-dated securities, but the £11bn figure itself is based on almost impossible scenarios and implementing the proposals would have a significant impact on market prices and credibility.”
Matt Hancock, the former health secretary and Bank economist, said the claims were “complete rubbish” and “spectacularly ill-informed”.
Moyeen Islam, director of European fixed income strategy at Barclays said the £11bn figure was “too simplistic” and suggested it might have been difficult for officials to find enough buyers to pull off the proposed swap. “The issue doesn’t exist in a vacuum,” he said.