Government Urged to Cut Bank Subsidies Amid Cost of Living Crisis

Think tanks are urging the government to take action to address the £18bn a year cost of the Bank of England's quantitative easing programme. The New Economics Foundation and Positive Money have modelled two scenarios that could save the Treasury money: slowing down bond sales and limiting interest paid on bank reserves.

In one scenario, where the Bank slows its quantitative tightening and reduces the interest it pays to commercial banks on reserves, the government could save £5.5bn a year. This is based on a tiered reserves policy of 4%, where the Bank would pay no interest to banks on required reserves of 4%. The UK had a similar policy in the 1970s.

Jaya Sood, senior economist at the New Economics Foundation, said: 'Whilst families continue to struggle with the cost of living crisis, banks continue to profit from a stealth subsidy from the exchequer worth billions as a direct result of decisions around how the Bank of England administers monetary policy.'