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Government borrowing, debt and debt interest: historical statistics and forecasts

Government borrowing, debt and debt interest: historical statistics and forecasts

After 2007/08 two measures of debt interest are shown: gross debt interest and net debt interest. The net figure includes the impact that the Bank of England’s quantitative easing has had on debt interest payments made by the government. The Asset Purchase Facility (APF) was set up for the Bank of England (BoE) to carry out quantitative easing, which aimed to stimulate the economy. The BoE bought government bonds through the APF from private investors such as pension funds and insurance companies to get money into the economy. While the bonds remain in the APF it means that government net debt interest is lower than it otherwise would have been. This is because the BoE is in the public sector, so when the government makes debt interest payments for the bonds held in the APF it is making them directly to another public sector body – this is a transfer within the public sector and the net effect is £0. This means that the actual cost to the public sector of holding the debt in the APF is the cost to the BoE of raising the funds used to buy the debt, which is the bank rate and it is lower than the debt interest.