Reform UK has urged Chancellor Rachel Reeves to seize a £20bn “lifeline” from the Bank of England by overhauling its money-printing programme, in a move the party says could plug much of Britain’s looming budget black hole.
Richard Tice, Reform’s deputy leader, revealed he had pressed the case directly with Bank of England governor Andrew Bailey during a meeting this week, describing the encounter as “very civil, polite and courteous”. Party leader Nigel Farage also attended.
The call focuses on the Bank’s programme of quantitative easing (QE), under which it created £895bn to buy government bonds during the financial crisis and Covid pandemic. While the scheme generated £125bn in profits for the Treasury, it also left the government liable for any losses.
With interest rates rising and bond values falling, those losses have ballooned since 2022. Under the Bank’s current “quantitative tightening” policy, it is now selling bonds at a loss — hitting the public purse with an estimated £20bn annual bill.
Reform argues that halting bond sales and paying less interest on the money created through QE would save the Treasury around £20bn each year. Tice said the Bank’s approach was “pushing up borrowing costs” and unfairly leaving taxpayers to shoulder the burden.
“If politicians gave the Bank a different steer, they could do it tomorrow,” Tice claimed.
Wider pressure on Reeves
The intervention comes as Reeves faces a potential £30bn hole in the public finances ahead of her November Budget. Economists say productivity downgrades from the Office for Budget Responsibility will force her into either deep tax hikes or spending cuts.
The New Economics Foundation (Nef), a left-leaning think tank, has echoed Reform’s argument. It warned that the Osborne-era deal tying the Treasury to Bank of England losses is “toxic” for fiscal policy and should be scrapped, with the Bank absorbing losses itself — as happens at the US Federal Reserve and the European Central Bank.
Nef economist Dominic Caddick said: “Instead of billing the Treasury, the Bank of England could absorb its own losses. That would free £20bn for the Chancellor without undermining monetary policy.”
Other think tanks have also joined the debate. The Institute for Public Policy Research (IPPR) has suggested imposing a new levy on commercial banks to claw back £8bn a year, while simultaneously ending bond sales at a loss to save another £12bn.
Reform, however, has set out how it would use the £20bn saving: raising the tax-free personal allowance to £20,000 and slashing corporation tax.
With Reeves under pressure from both the Left and Right, the Bank of England’s QE programme has become an unlikely political battleground — one that could shape November’s fiscal showdown.
