IPPR Urges Reeves to Impose £8bn Bank Tax Amid QE Losses

Chancellor Rachel Reeves is being urged by the Institute for Public Policy Research (IPPR) to implement a new tax on banks, inspired by Margaret Thatcher's 1981 levy, that could raise up to £8 billion annually by targeting profits banks earn from reserves held at the Bank of England due to quantitative easing (QE). The IPPR criticizes QE's design, highlighting that rising interest rates have turned a policy meant to stimulate the economy into a costly burden on taxpayers, with the Bank of England paying more interest on reserves than it earns from bonds, resulting in projected losses exceeding £22 billion annually. The think tank also recommends slowing quantitative tightening (QT) bond sales to save an additional £12 billion per year. Proceeds from the proposed levy would support households and economic growth, and the tax would be temporary, ending once QE-related gilts leave the Bank's balance sheet or when the base interest rate falls to 2 percent. While the measure aims to recoup windfall profits banks have gained at the public's expense, it faces opposition from banking trade groups concerned about competitiveness and increased taxation on the sector. IPPR's associate director Carsten Jung calls the current situation a “massive drain on taxpayer money” and stresses the levy would help redirect funds from bank balance sheets to public benefit.