The Bank of England has rejected proposals from Reform UK to cease interest payments to commercial banks on reserves, amid criticism that this practice drains taxpayer resources. Reform UK argues this system, which arose from quantitative easing, is an unnecessary burden and could save taxpayers up to £35 billion annually. Critics point out that major banks have benefited greatly from these payments, claiming they are out of touch with current economic needs. However, Bank of England Governor Andrew Bailey maintains that these payments are crucial for maintaining financial stability.
At the heart of the row is the legacy of quantitative easing (QE) - the Bank's £895 billion bond-buying programme launched during the global financial crisis and expanded in response to the pandemic.
Reform UK argues that paying interest on these reserves is unnecessary and should be scrapped immediately - a move they claim could save up to £35 billion annually.
Critics claim that the current system had become 'an unaffordable luxury' at the taxpayers' expense, enriching City institutions to the tune of tens of billions of pounds.
Despite mounting political pressure, the Bank of England has dismissed calls to end interest payments on reserves, insisting that the current policy is still justified.
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