It is quite simple really....The Bank of England creates an accounting entry on the liabilities side of their balance sheet. It is called reserve balances. On January 1, it says reserves balances are ₤23 billion. On April 30th, it records that reserve balances have "increased" to ₤70 billion. It then gives these reserve balance accounts in return for government paper.
The banks then have an asset on their balance sheet called "reserve balances at the Bank of England", which they can exchange, if they want to, for cash.
Reserve balances are the route to monetizing the fiscal deficit and ultimately to higher inflation and macroeconomic chaos.
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