The Chancellor, John Healey, cut the authorised ceiling on the Bank of England’s Asset Purchase Facility (APF) to £482.4bn from £524.9bn on Tuesday, as the Bank and HM Treasury weigh selling remaining gilts to the government.
The APF is the Bank’s portfolio of UK government bonds (gilts), bought under quantitative easing and now being reduced on the instructions of the Monetary Policy Committee (MPC).
The ceiling is the maximum size the Treasury authorises, and it is backed by a Treasury indemnity against losses.
Healey, in a letter to Governor Andrew Bailey, said officials “continue to work together to develop a model whereby all APF active gilt sales are conducted to the government and not to the market”. The two sides will review progress before April 2027.
Any switch is subject to a final decision. If it goes ahead, implementation could begin in a way that fits into the annual financing remit that the Debt Management Office (DMO) receives from the Treasury.
Ceiling set at the stock held on 4 November
The new ceiling matches the £482.4bn of gilts the APF held on 4 November. Of that, £362.4bn is authorised for monetary policy purposes and £120bn for indirectly backing banknote issuance.
The stock is £412.5bn below its January 2022 peak of £894.9bn, a fall of 46%, the Chancellor said.
The reduction follows an approach agreed on 3 February 2022 under which the ceiling is reset every six months in line with the fall in assets. The amount is to be reviewed and confirmed again in six months.
Sales pace of £20bn a year to the end of 2034
The MPC’s plan is to sell gilts at an annual pace of £20bn in purchase proceeds terms until those held for monetary policy are fully unwound by the end of 2034. Allowing for the maturity profile, that equals an average annual stock reduction of £46bn.
The Bank Executive has said it will not sell gilts with redemption dates earlier than 2035. The £120bn of longest-dated gilts will stay in the APF to back banknote issuance.
Bailey’s letter said the Bank Executive “is considering adjusting the way it conducts the remaining gilt sales” and intends to carry out the MPC’s plan through sales to the government. That approach is subject to final agreement with the Treasury.
Whatever is decided, the Bank will announce by April 2027 the operational details of how it will carry out the plan, Bailey said.
Healey said he welcomed that the APF “continues to be unwound in a way that maximises value for money by minimising cost and risk”. Officials will keep monitoring implementation and risks to the Exchequer, and future cash transfers will follow the indemnity terms used to date.
Previous cut was from £555bn on 5 May
The last reset, on 5 May 2026 under then Chancellor Rachel Reeves, lowered the ceiling to £524.9bn from £555bn, based on the stock at 29 April. At that point the APF was £370bn below its peak, a 41% reduction.
The ceiling has therefore fallen by £42.5bn since May, and the share removed from the peak has risen by five percentage points.
The 2022 arrangement, agreed by then Chancellor Rishi Sunak, set the six-monthly cycle in a letter of 3 February 2022. Under it, any future cash shortfall in the APF is met in full by the government.
The Chancellor’s letter was copied to the chairs of the Treasury Committee and the Public Accounts Committee. The Bank said its operational details will follow by April 2027.
