(Bloomberg) -- The Bank of England’s effort to stimulate the economy during the pandemic is responsible for all £115 billion ($144 billion) of the net losses on quantitative-easing that UK taxpayers will have to cover, analysis by Bloomberg shows.

Using the central bank’s latest estimate of the lifetime cost of the program, a Bloomberg analysis indicates that the BOE is on track to lose at least £120 billion on the bonds it bought under QE during Covid in 2020 and 2021. The earlier phase of QE, done during the financial crisis and up to 2016, will end up being marginally profitable. 

Taxpayers will have to pick up the bill under a guarantee agreed with the BOE when the program was launched in 2009. Losses over the next decade will consume revenue that might have otherwise gone to cutting taxes, funding the military or bolstering the country’s struggling public services.

Senior officials and economists have raised questions about whether the program went too far, blaming it for contributing to runaway inflation in 2022, as well as saddling the exchequer with billions of pounds in extra debt-interest payments. 

“QE did not cause inflation, but it certainly enabled it to take root,” Nick Macpherson, the Treasury’s former top civil told the House of Lords during a debate on the central bank on Thursday. Former BOE Governor Mervyn King, who introduced QE and left the post in 2013, similarly told Parliament’s upper chamber that printing money during lockdown was an error. “Too much money chasing too few goods has always been a recipe for inflation,” he said.

The BOE didn’t dispute Bloomberg’s analysis, saying the bank “has been fully transparent on the cashflows.” Last month, the House of Commons Treasury Committee said the BOE had “refused the request to set out whether it thinks that all individual rounds of QE have proved to be good value for money.”

QE is under scrutiny because the taxpayer will have to cover losses of about £20 billion a year for the next decade. The impact is worse in Britain than any other Group of Seven nation that conducted QE, the Organisation for Economic Cooperation and Development said this week.

Initially, the assets bought under QE were profitable due to low interest rates, which the bank kept below 1% for the first 12 years of the program. Between 2009 and September 2022, it made £124 billion in profit, all of which was spent.

The bank’s subsequent decision to raise interest rates to fight inflation — pushing them up to 15-year high of 5.25% in August — have turned the program loss-making. That’s because the interest the BOE pays on the reserves created to buy assets is greater than the income it earns on those assets, mostly government bonds.

Already, the Treasury has transferred £50 billion to the BOE and the central bank expects close to £200 billion more to be transferred over the next 10 years. By the time the £895 billion program is fully unwound in the 2030s, the net loss will total £115 billion. 

Several economists and think tanks have urged the government to reclaim some of the losses to ease fiscal strains, either through a windfall tax on banks benefitting from the arrangement or changes to the BOE’s policy. “I anticipate that future governments will want to put a stop to the fiscal leakage caused by QE,” Macpherson said.

Earlier this month, 44 lawmakers in the ruling Conservative Party wrote to Chancellor Jeremy Hunt, expressing “deep concern” about the BOE’s handling of QE. The Treasury Committee has called on the government to ensure the BOE delivers “value for money.”

Pandemic QE faces much deeper losses because the period of beneficial low rates was comparatively brief and the prices paid for the assets were relatively high. For every £1 of losses on pre-pandemic QE in the years ahead, as much as £2.50 may be lost on pandemic QE, according to Sanjay Raja, chief UK economist at Deutsche Bank.

Macpherson said the current fiscal cost of QE would have been less severe had former Chancellor George Osborne not changed the rules to take profits upfront, an arrangement signed off by King in 2012. “The coalition government chose to draw down the gains to meet its fiscal rules and we are now paying the price,” Macpherson said.

A BOE spokesperson said: “Up until September 2022, the Asset Purchase Facility activities generated positive net cash flows to HM Treasury. It was always recognized that reverse payments from HMT to the APF were likely to be needed in the future as Bank Rate increased and as the APF’s gilt holdings were eventually unwound.”

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