Reform UK calls for overhaul of Bank of England money printing to free billions for public purse

Reform UK is intensifying calls for sweeping changes to the Bank of England’s quantitative easing programme, urging Chancellor Rachel Reeves to seize a £20bn annual windfall by reforming the way the central bank handles money printing and bond sales.

Richard Tice, the party’s deputy leader, revealed that he will write to both Reeves and the House of Commons leader to request an urgent parliamentary debate on the subject, following a recent meeting with Bank Governor Andrew Bailey attended by Nigel Farage. The party suggests the Treasury stands to save billions by adjusting the terms of the quantitative easing scheme, which involved the creation of enough money to buy £895bn in UK government bonds during the last financial crisis and the Covid-19 pandemic.

The Bank generated almost £125bn of profit through these bond holdings, profits which were transferred to the Treasury. However, an agreement also means the Treasury must cover any losses. The surge in interest rates and falling bond values since 2022 have turned profits into steep losses as the Bank unwinds its position by selling bonds—actions which critics say are exacerbating pressures on the public finances.

Reform UK argues that halting the sale of these bonds and reducing the rate of interest paid on reserves could provide a £20bn boost per year. The party underlines its intention to use these potential savings to increase the personal tax-free allowance to £20,000 and reduce corporation tax rates if it gains power. Tice contends that the Bank’s unwinding strategy—known as quantitative tightening—is driving up borrowing costs and proving costly for the taxpayer.

The New Economics Foundation, a think tank with left-leaning credentials, has called on the Treasury to alter the terms so that the Bank of England absorbs its own losses, following models used by the European Central Bank and the US Federal Reserve. This approach would see the Bank use its regular profits to gradually reduce losses, lowering the immediate burden on the taxpayer and giving the Chancellor more fiscal flexibility at a time when economists estimate a £30bn hole exists in the nation’s finances.

Suggestions to limit public exposure to losses are gathering momentum across the political spectrum. The Institute for Public Policy Research has also floated the idea of introducing a new bank levy on reserves held at the Bank, potentially raising £8bn annually, with a further £12bn saved if the Bank stops selling bonds at a loss. With debates around fiscal rules intensifying as the Budget looms, pressure grows on the Treasury and Bank of England to find innovative solutions for the taxpayer’s benefit.