The Treasury should tax commercial banks to compensate for the effects of quantitative easing, according to think tank the Institute for Public Policy Research (IPPR).<\/p>\n
This would be reminiscent of Margaret Thatcher\u2019s 1981 deposit tax on banks, and could save \u00a37-8 billion a year over this parliament<\/p>\n
The UK taxpayer is spending \u00a322 billion a year compensating the Bank of England for losses on its QE programme, while since interest rates began rising in December 2021, the four largest UK banks have seen their annual profits more than double, up by \u00a322 billion compared to pre-pandemic.<\/p>\n
The think tank said that some of this is a direct transfer of funds from the taxpayer to shareholders.<\/p>\n
The suggestion comes amidst the Chancellor\u2019s leaked plans to charge National Insurance contributions on private landlords\u2019 rental income.<\/p>\n
Carsten Jung, associate director for economic policy at IPPR, said: \u201cThe Bank of England and Treasury bungled the implementation of quantitative easing.<\/p>\n
\u201cWhat started as a programme to boost the economy is now a massive drain on taxpayer money.<\/p>\n
\t <\/p>\n
\u201cPublic money is flowing straight into commercial banks\u2019 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.<\/p>\n
\u201cThis is not how QE was meant to work \u2013 and no other major economy does it this way. A targeted levy, inspired by Margaret Thatcher\u2019s own approach in the 1980s, would recoup some these windfalls and put the money to far better use \u2013 helping people and the economy, not just bank balance sheets.\u201d<\/p>\n
The think tank said that, under the current set-up, the Treasury pays the Bank of England for both interest rate losses and the drop in value of gilts bought during QE. These payments ultimately benefit commercial banks, and other financial institutions, which hold hundreds of billions of pounds of QE-related reserves at the Bank of England. The UK is an international outlier in having its Treasury pay for its central bank\u2019s losses.<\/p>\n
To rectify this, IPPR recommends that:<\/p>\n
\u2022 The Treasury introduces a QE reserves income levy on commercial banks<\/p>\n
\u2022 The Bank of England slows down quantitative tightening (QT), by ending the Bank of England\u2019s fire sale of government bonds to save more than \u00a312bn a year<\/p>\n
IPPR says these two policies could save the taxpayer over \u00a3100 billion over the course of this parliament, giving the government fiscal headroom.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Treasury should tax commercial banks to compensate for the effects of quantitative easing, according to think tank the Institute for Public Policy Research (IPPR). This would be reminiscent of Margaret Thatcher\u2019s 1981 deposit tax on banks, and could save \u00a37-8 billion a year over this parliament The UK taxpayer is spending \u00a322 billion a […]<\/p>\n","protected":false},"author":1,"featured_media":3062,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-3061","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-second-home"],"yoast_head":"\n