Officials I have spoken to since venting my anger at the raid on the government’s quantitative easing surplus have struck a decidedly disappointed tone. It was a shame I didn’t understand that there was no trickery involved; it was a pity I could not see that the move was standard practice in public sector liability management; and it was sad I had questioned whether the the Treasury’s move, which itself eased monetary conditions, undermined the Bank of England’s operational independence to set monetary policy.

While I have convinced a sizable majority of readers, I note that some people are swallowing these lines without much challenge. Here I will deal with trickery and liability management. In the next post, I will turn to monetary policy. Simon Ward of Henderson Global Investors is the latest to say that anything other than treating temporary profits from QE as government revenue “would be out-of-line with the treatment of other future government liabilities”. Read more