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Monetary Policy

Question for Treasury

UIN HL5755, tabled on 27 January 2022

To ask Her Majesty's Government what contingency plans they have put in place since the temporary liquidity shortage in March 2020 for the management of subsequent liquidity shortages.

Answered on

8 February 2022

As the Chancellor has made clear publicly before, the government will continue to use the markets as its primary source of financing.

HM Treasury and the Bank of England (“the Bank”) announced in March 2020 that the government’s long-established Ways and Means (W&M) facility could, if necessary, play a role in providing a short-term source of additional liquidity to the government to smooth its cashflows and support the orderly functioning of markets, through the period of disruption from Covid-19. It was agreed that any use of the W&M facility was to be repaid as soon as possible before the end of the year.

The W&M facility is the government’s long-established overdraft at the Bank. Ordinarily, a standing balance of around £400m is maintained in the W&M facility to support Exchequer cash management. That remained the case throughout 2020-21 (a period during which the W&M facility had not been drawn on).

HM Treasury, the Debt Management Office and the Bank continue to cooperate closely to support the orderly functioning of the gilt and sterling money markets.

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