% UK Debt Held by Bank of England

Readers Question: Can someone please tell me what percent of the UK debt is held by the Bank of England?

The Bank of England have purchased £325 bn of asset purchases, which are financed by issuing created reserves. Of these £325bn of assets, the vast majority are government gilts (bonds).

The government’s net public sector debt is currently £1022.5 billion. Therefore, roughly 25-30% of public sector debt is held by the Bank of England as asset purchases. Q.E. at Bank of England

gilts

This shows that 21% of gilts were held by Bank of England in 2010 (Who lends government money)

This graph from the Bank of England shows that by Q2 2011, the Bank of England held £200bn of government gilts a substantial part of the increase in gilts. There has also been a rise in external debt.

Source: Q.E. Bank of England

Also is it true that
1) If debt is held by the Bank of England then we (the people) hold our own debt?

  • You could argue that if a domestic pension fund buys government debt, then in a way we hold our own debt. The private sector is lending to the government.
  • In the case of the Bank of England, the debt is being held by a subsidiary of the government.
  • About 30% of UK debt is held by foreign investors. This is the only part of government debt that is held by people outside the UK. See: Who lends the government money?

2) Interest paid to the Bank of England is really coming back to us?

I don’t know what happens to the interest paid to the Bank of England.

3) Quantitative easing is really a way for the Bank of England (us) to buy up debt.

I do believe the main motivation for quantitative easing is to try and increase nominal demand. Q.E. was started in 2009, when GDP fell by 6%. Without Q.E. bond yields would be higher (though they are close to historical lows). But, I do think we would still be able to sell the necessary government bonds. In a liquidity trap with rise in saving ratios, there is a high demand for  government bonds.

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