{"id":56470,"date":"2021-04-12T07:39:32","date_gmt":"2021-04-12T06:39:32","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=56470"},"modified":"2021-04-12T07:39:32","modified_gmt":"2021-04-12T06:39:32","slug":"the-changing-ownership-of-government-debt","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2021\/04\/12\/the-changing-ownership-of-government-debt\/","title":{"rendered":"The changing ownership of government debt"},"content":{"rendered":"

The Debt Management Office of the UK government has issued new data<\/a> showing the changing profile of the ownership of UK government debt:<\/p>\n

\"\"<\/p>\n

In 2004 around 75% of Uk government debt was owned by insurance and pension companies. The rest was almost entirely owned by overseas interests, Banks held almost none, and nor did the government.<\/p>\n

Now the Bank of England is the biggest owner:<\/p>\n

\"\"<\/p>\n

The trend will continue. By the end of 2021 the Bank of England is set to own \u00a3895 billion of UK debt.<\/p>\n

For those who say that there has been no such thing as direct monetary funding, or that the government cannot fund itself, or that there is no magic money tree, the evidence to the contrary is very clear.<\/p>\n

But, and I make this point with good reason, there are three things to note. First, this data is based on market value. At 31 December 2020 the nominal value of gilts was as follows:<\/p>\n

\"\"<\/p>\n

The difference between gross and net values is the value of the gilts held by the Debt Management Office itself - which adds to the net government holding.<\/p>\n

Second, market value is very different:<\/p>\n

\"\"<\/p>\n

There is currently a premium of \u00a3740 billion within gilt stocks. Over the next 17 years that will unwind.<\/p>\n

Third, note that we know the yield, and so that premium, is falling now.<\/p>\n

But, the question is, does that make it any harder for the government to do QE, and so fund its own activities? The simple answer is no. In that case I suspect that \u00a3100 billion of QE will be the annual norm for 2022 onwards.<\/p>\n

Direct monetary funding of government is here to stay, in my opinion.<\/p>\n

Importantly, that does not deny others the right to save in gilts. Just recall that their total value has increased considerably since 2005. The government can both fund itself and be the borrower of last resort. Stability can be offered despite this situation. And that is what matters.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Debt Management Office of the UK government has issued new data showing the changing profile of the ownership of UK government debt: In 2004
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