Bank of England and chancellor cut asset purchase facility ceiling to £482.4bn

The Chancellor and the Governor of the Bank of England have agreed to cut the maximum authorised size of the Asset Purchase Facility to £482.4bn from £524.9bn, the Treasury said on Tuesday.

The new ceiling matches the £482.4bn of gilt holdings in the facility as of 4 November, Governor Andrew Bailey said.

Chancellor John Healey said he welcomed that the facility “continues to be unwound” in a way that “maximises value for money”.

The facility holds the gilts, or UK government bonds, that the Bank bought in support of its statutory objectives, and it is being reduced on the instructions of the Monetary Policy Committee.

The Treasury has indemnified the facility’s activities since it was set up in 2009, and the authorised maximum is meant to be adjusted as holdings change.

Of the new £482.4bn ceiling, £362.4bn is authorised for monetary policy purposes and £120bn is authorised to indirectly back current and future banknote issuance.

The facility has shrunk by £412.5bn from its January 2022 peak of £894.9bn, which Healey put at a 46% reduction in the stock of assets held.

That compares with a 41% reduction, or £370bn, recorded in the May exchange, when the stock stood at £524.9bn as of 29 April.

The May ceiling of £524.9bn itself replaced a £555bn limit that had been agreed in November 2025, so the latest step is a cut of £42.5bn.

The six-monthly adjustment follows an approach agreed in February 2022, when the MPC voted to start reducing the facility’s assets and the Governor and Chancellor agreed to shrink the indemnity alongside it.

Healey said the MPC’s plan is an annual sales pace of £20bn in purchase proceeds terms until the gilts held for monetary policy are fully unwound by the end of 2034.

Taking the maturity profile into account, he said, that is equivalent to an average annual reduction in the stock of £46bn.

The Bank Executive has said it will not sell gilts with redemption dates earlier than 2035, and that £120bn of the longest-dated gilts will remain in the facility to back banknote issuance.

Bailey said the Bank Executive intends to carry out the remaining sales to the Government rather than to the market, subject to final agreement with the Treasury.

Healey said Treasury and Bank officials are developing a model in which all active gilt sales are conducted to the government, not to the market.

He said progress would be reviewed before April 2027, so that, subject to a final decision, the approach could be built into the annual financing remit that the Treasury sets for the Debt Management Office.

Healey added that officials will keep monitoring the facility’s implementation and risks to the Exchequer, with any future cash transfers handled under the terms of the indemnity as before.

The Bank will announce the operational details of the multi-year plan by April 2027, whatever the final decision on sales to the Government, and the ceiling will be reviewed again in six months alongside the facility’s quarterly report.