Market News
UK should tax banks on reserves held at BoE, think-tank says - REUTERS
Summary
- IPPR says Britain is subsidising banks
- Others have called for changes to interest system
- Reeves under pressure to raise revenues in budget
- Bank shares fall in early trade
LONDON, Aug 29 (Reuters) - British finance minister Rachel Reeves should use her autumn budget to tax banks on the billions of pounds they receive in interest from the Bank of England on reserves they hold at the central bank, a think-tank recommended on Friday.
Around 22 billion pounds ($29.7 billion) a year, which goes to the banks as a result of the BoE's bond-buying programme, represents a subsidy to the lenders, the Institute for Public Policy Research said.
Echoing calls made by other commentators in recent years, the IPPR said a new tax on the interest the banks receive would give Reeves more room to meet her fiscal rules.
Reeves is widely expected to increase taxes again after raising them on employers in her first budget last year.
"What started as a programme to boost the economy is now a massive drain on taxpayer money," Carsten Jung, associate director for economic policy at IPPR, said.
British bank shares were the worst performers among the STOXX 600 (.STOXX) index of large European companies after the Financial Times said fears were growing in the finance industry that Reeves would target banks in her budget.
