IPPR says these two policies could save the taxpayer over £100 billion over the course of this parliament giving the government much needed fiscal headroom and allowing them to support households.
Chancellor Rachel Reeves has been told that a tax on bank profits could raise up to £8 billion a year for public services.
The Institute for Public Policy Research says that the move would give the chancellor much needed fiscal headroom, should a levy on the windfalls from major firms such as Barclays, Lloyds, HSBC and NatWest be imposed.
The Independent reports: “The think tank argues the UK is an international outlier in having its Treasury pay for central Bank losses on its bond-buying quantitative easing (QE) programme.
“After a period of making profits on this programme, the Bank of England is facing record losses, estimated to cost the taxpayer £22 billion a year, as interest rates have risen since 2021, it warned.
“This money is then partly being funnelled to bank shareholders due to a “flawed” policy design, boosting profits while millions across Britain continue to face cost-of-living pressures, the report says.”
The IPPR recommends that the Treasury introduce a “QE reserves income levy” to raise much needed funds which can then be used to improve public services and balance the books.
In addition, the IPPR also recommends that the Bank of England slow down its sale of bonds – so-called quantitative tightening (QT) – to save more than £12 billion a year.
IPPR says these two policies could save the taxpayer over £100 billion over the course of this parliament giving the government much needed fiscal headroom and allowing them to support households.
Carsten Jung, associate director for economic policy at IPPR, said: “The Bank of England and Treasury bungled the implementation of quantitative easing. What started as a programme to boost the economy is now a massive drain on taxpayer money. Public money is flowing straight into commercial banks’ coffers because of a flawed policy design. While families struggle with rising costs, the government is effectively writing multi-billion-pound cheques to bank shareholders.
“This is not how QE was meant to work – and no other major economy does it this way. A targeted levy, inspired by Margaret Thatcher’s own approach in the 1980s, would recoup some these windfalls and put the money to far better use – helping people and the economy, not just bank balance sheets.”
Basit Mahmood is editor of Left Foot Forward
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