A leading think tank has urged the Chancellor to introduce a new levy on banks that could raise £8billion a year for public services.
The Institute for Public Policy Research (IPPR) argues that profits at institutions such as Barclays, Lloyds, HSBC and NatWest are being boosted by what it calls a “flawed policy design” in the Bank of England’s quantitative easing (QE) programme.
Losses from QE are now costing taxpayers an estimated £22billion annually as higher interest rates bite, the IPPR said.
It warned that money is flowing directly to bank shareholders at a time when households are still grappling with cost-of-living pressures.
Its report suggests a “QE reserves income levy” could mirror a temporary 2.5% deposit tax imposed on banks by Margaret Thatcher in 1981, and would fall away once QE-related gilts are wound down or interest rates drop back to 2%.
The IPPR also wants the Bank of England to slow its bond sales – known as quantitative tightening – claiming this could save the Exchequer more than £12billion a year. Combined, the two measures could deliver over £100billion in fiscal headroom across this Parliament.
Critics in the financial services sector warn that an additional tax would damage competitiveness. UK Finance said that UK banks already face both a corporation tax surcharge and a bank levy, and said piling on another charge would run counter to the government’s ambition of growing the sector.
A Treasury spokesperson said its focus remained on boosting growth through reforms, while emphasising that the Bank of England’s Monetary Policy Committee retains independence over monetary policy decisions.
FTSE 100
The UK's flagship share index, the FTSE 100, was down 54 points at 9,208 shortly after opening this morning.
Brent crude oil futures were up 0.68% at $66.96 a barrel.
No companies reporting today