© Reuters. British Chancellor of the Exchequer Jeremy Hunt walks outside Number 10 Downing Street in London, Britain, March 18, 2024. REUTERS/Toby Melville/File Photo
LONDON (Reuters) -British finance minister Jeremy Hunt said changes to the way that banks are paid interest on the reserves they hold at the Bank of England could hurt the country’s competitiveness as a financial services centre and is not under review.
“I think there would be other impacts to a decision like that,” Hunt told the Economic Affairs Committee of the House of Lords on Tuesday.
“There would be particular impacts on the competitiveness of British banks and the competitiveness of the UK financial services sector, and that’s why that’s not something that we are currently considering.”
Some former BoE officials say the government could save tens of billions of pounds by paying commercial banks interest on only a portion of their deposits at the BoE.
Those deposits have soared in size due to the central bank’s emergency bond-buying since the 2007-08 financial crisis.
The government made a profit on the programme when borrowing costs were low but now it must cover the cost of the BoE paying higher interest on the reserves.
Hunt said taxes paid by Britain’s financial services industry were equivalent to about half the cost of running the National Health Service, underscoring its importance as an economic sector.
“I am very well aware of the arguments that are made in that area,” Hunt said, but he stressed changes to the system were not on the cards: “I am saying we’re not considering doing that.”
Read the full article here
