IPPR calls for temporary bank levy to recoup QE losses, up to £8bn

An influential think tank has urged Chancellor Rachel Reeves to impose a temporary levy on banks to recoup billions of pounds the taxpayer is said to be covering as a result of the Bank of England's quantitative easing programme. The Institute for Public Policy Research said on Friday that a QE reserves income levy on the extra interest earned by lenders could raise up to 8 billion pounds a year and that, together with changes to the central bank's asset-sales timetable, the measures could save more than 100 billion over the course of this parliament.

The report sets out how the losses arose. During rounds of quantitative easing the Bank of England bought government bonds from commercial banks and created central bank reserves to pay for them. Banks are paid interest on those reserves at the Bank rate. As interest rates have risen since 2021, the Bank has been paying more on reserves than it earns on the gilts it holds, generating record losses that are ultimately covered by the Treasury and taxpayers. The IPPR estimates those losses at roughly 22 billion pounds a year, though some analysts put the figure higher.

Carsten Jung, associate director for economic policy at the IPPR...