Under a deal cut by Mr Osborne, the Government foots the bill for any losses the Bank incurs from the difference between returns on its bond holdings and the interest it pays out.
Recent interest rate rises and chaos in gilt markets “will mean cash starts flowing from the Treasury to the [Bank]”, the OBR said.
The policy was introduced by Mr Osborne in November 2012 when the Bank was making a profit because interest rates were lower than bond returns.
Mr Osborne, who was then Chancellor, declared that income from these bonds could be used to reduce government debt.
At the time, the The Treasury was given £120bn as a result.
However, the Government also agreed to cover future losses if interest rates spiked above returns on bonds. Rates have risen steeply since the start of the war in Ukraine as officials attempt to control inflation.
Economists said the fiscal hole created by the policy is a result of the Bank’s quantitative easing (QE) programme running for an extended period.
Andrew Lilico, of Europe Economics, said: “There is no doubt that the Bank did more QE for longer than they should have and we are now reaping the consequences.”
Government’s tax and spending watchdog added: “Across the forecast, the Treasury pays £133bn to cover these losses, more than reversing the previous 13 years gains.”
Speaking to Bloomberg last week, Jagjit Chadha, director of the National Institute of Economic and Social Research, said: “The blurring of lines between monetary and fiscal policies has not been helpful to the setting of either branch of policy.
“It would have been better to have kept the proceeds of this carry trade in a separate financial vehicle.”
