UK lawmakers challenge Bank of England quantitative tightening costs and gilt losses

UK politicians across party lines are criticizing the Bank of England’s quantitative tightening (QT). The core issue is fiscal exposure: the BoE is selling government bonds (gilts) bought during the quantitative easing era at large losses, and a Treasury indemnity means taxpayers cover those losses. QT launched in February 2022 to unwind years of bond-buying. At its peak, BoE QT-related holdings were about £895bn. By June 2026, they had fallen to about £523bn, cutting roughly £370bn. The reduction comes from two routes: (1) active gilt sales and (2) allowing bonds to mature without reinvesting. Critics argue the active sales component is the costly part. When the BoE bought the bonds, rates were near zero, so prices were high. With interest rates now higher, the same bonds are worth less, so selling “locks in” crystallized losses. They say a slower, more passive approach—holding to maturity—could achieve the balance-sheet reduction over time while avoiding billions in realized losses. Reform UK (Nigel Farage and Richard Tice) is the most vocal, estimating pausing active sales could save tens of billions of pounds annually. BoE Governor Andrew Bailey counters that quantitative tightening is about maintaining monetary policy credibility, not fiscal objectives, and rejects calls to halt active gilt sales. For investors, any change in the QT pace could shift gilt supply dynamics: fewer sales would tend to support gilt prices and lower yields, while faster QT drains banking reserves and tightens financial conditions beyond the policy rate alone. Traders should watch whether political pressure translates into actual changes to QT operations, given there is still a large remaining QT portfolio.