The scale of the Bank’s losses will be a problem for whoever wins the general election, Mr Mahon said, as neither Rishi Sunak nor Sir Keir Starmer “will want to govern with the headwind of QE bills of £5-10bn every few months”.
He said: “That is putting pressure on the government finances, and means the Government is starting to ask questions to the Bank of England.”
QE, under which the Bank created money to buy government bonds, initially made a profit for the Treasury of more than £120bn.
However, high interest rates and the sale of bonds at a loss mean the Bank is now losing money. Losses are expected to exceed £100bn over the next eight years, according to official figures.
Since 2009, successive chancellors have said the Treasury would cover any losses on the scheme.
Bank bought bigger share of bond market
Mr Mahon said Britain’s losses are particularly severe because the Bank of England bought up a bigger share of the bond market than the Fed or the European Central Bank.
This was then followed by a move to offload bonds rather than holding onto them until maturity, unlike at other central banks.
The losses on long-dated bonds are vast.
Mr Mahon points out that the Bank recently suffered losses of up to 70pc on the sale of some long-dated bonds.
The Bank also opted against buying index-linked bonds, which benefit from protection against inflation and fared better during the cost of living crisis.
He said: “The Bank of England chose not to include inflation-protected bonds which fared much better – unlike the Fed, which included such securities in their purchases under quantitative easing.”
