The British government said Friday that it will receive about £35 billion in interest earned on state debt that was purchased under the Bank of England's quantitative easing (QE) stimulus policy. Chancellor George Osborne and BoE governor Mervyn King have agreed that the central bank will give the Treasury all interest earned on government debt owned under its £375-billion asset purchasing scheme.
Under QE, the Bank of England creates new money that is used to purchase assets such as government and corporate bonds with the aim of boosting economic activity. "The government (has) agreed with the Bank of England to transfer to the Exchequer the excess cash held in the bank's Quantitative Easing facility," the Treasury said in a statement on Friday. "This will align the cash management arrangements for the facility with normal government practice and with the approach followed by other countries undertaking QE."
The Treasury said that the BoE's Asset Purchase Facility (APF) - which holds funds used to carry out QE asset purchases - was expected to increase to around £35 billion by the end of March 2013.