Calls Grow for Taxing Bank Reserves Interest to Aid Public Services
A think tank has urged the UK government to tax banks for interest earnings from reserves held at the Bank of England, suggesting it could aid public services funding. This program stems from the BoE's quantitative easing, and has become costly, prompting discussions about policy changes.
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- United Kingdom
The UK government is being urged to impose taxes on banks for billions in interest earnings from reserves parked at the Bank of England, according to a recommendation by the Institute for Public Policy Research (IPPR). The think tank reports that these funds, totaling around 22 billion pounds annually, serve as subsidies to lenders, which compromise public services funding.
This call for change is not new, but the IPPR insists that such a tax would provide finance minister Rachel Reeves with greater fiscal flexibility. With her autumn budget approaching, Reeves may again increase taxes, following similar actions with employers last year, to adhere to fiscal regulations.
Critics, including former BoE deputy governor Paul Tucker, have long advocated for revisiting this policy. While BoE Governor Andrew Bailey maintains that current practices are vital for economic rate transmission, the now costly bond-buying strategy from the 2008-09 financial crisis is being revisited, particularly as political pressure mounts.
(With inputs from agencies.)
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