Reform UK has slammed the Bank of England (BoE) for wasting billions of pounds of hard-earned, taxpayer’s money. Deputy leader Richard Tice has written a scathing letter to Andrew Bailey, the Governor, slamming the Bank’s money-printing scheme, outlining the “strain” and “pressure” that the nation’s accounts are already under.
In the letter, Mr Tice claimed that paying interest on cash in the Bank, as well as selling government bonds at a loss, is a “systemic misuse of taxpayers’ money”. Reform now claims it could save the country an eye-watering £35billion a year by getting rid of interest on central bank reserves which is part of the BoE’s quantitative easing (QE) programme, created to boost the economy. Nigel Farage’s party would use the money saved from cutting the scheme to pay for the increase in the tax-free personal allowance to £20,000.
“The Bank of England is unnecessarily wasting tens of billions of pounds of taxpayers’ money, whilst enriching City institutions,” Mr Tice’s letter says, first reported by The Telegraph.
It continues: “The nation’s accounts are already under very severe pressure. QT (quantitative tightening) is also partly responsible for keeping gilt yields higher than they otherwise would be, resulting in even more punitive interest costs, imposing yet more strain on the [public finances].”
Commercial banks currently earn interest at the base rate on reserves held at the Bank of England. The Bank made profits from the QE programme when interest rates were at record lows due to the returns on government gilts it bought being higher.
NatWest, Barclays, Lloyds and Santander were among the banks which received interest on reserves in 2023, totalling a whopping £9billion.
However, Mr Bailey has warned on numerous occasions that stopping interest payments on reserves could alter the Bank’s ability to influence the cost of borrowing.
The governor said in a letter to the Treasury select committee in April: “Remuneration of reserves is a key component of the Bank’s approach to ensuring rate control. Any loss of rate control would undermine the MPC’s ability to affect the real economy with its interest rate decisions and could cause significant harm to credibility of monetary policy.”
A Bank of England spokesman said: “The Governor set out the Bank’s views on the matter in a letter to the Treasury Select Committee.”