The Bank of England should curb losses to the taxpayer as it cuts its bond holdings and back the development of cryptocurrency, Reform UK leader Nigel Farage and his deputy Richard Tice told governor Andrew Bailey on Thursday.
The rightwing populist party has been critical of losses the BoE is sustaining as it pursues quantitative tightening, where the central bank is selling off the government debt it built up during successive economic shocks.
Farage’s party, which is leading national opinion polls, has also called on the BoE to stop paying interest on reserves held by commercial lenders at the central bank. They have swelled as a result of the bond-buying — or quantitative easing — programmes that started with the 2008-09 global financial crisis.
Holdings of UK government debt peaked in 2022 at £875bn in the wake of the Covid-19 pandemic and have since been pared back steadily.
After joining Farage at a meeting with Bailey at the BoE on Thursday morning, Tice told the Financial Times that “these issues are actually fiscal issues and the government should be taking a much more active view”.
Bailey had agreed that the BoE balance sheet was an important area of public policy and “welcomes more debate” and “appreciates the interest”, said Tice, warning of his own “anxiety that there’s almost a fear among parliamentarians that they can’t be seen to debate this issue”.
The BoE declined to comment on the detail of the meeting but said: “The governor had a productive meeting with Reform UK on Thursday as part of the Bank’s engagement with political representatives.”
The BoE has previously said it welcomed accountability for its policies on QT and QE through parliament, and that it is developing proposals for regulating stablecoins, a form of digital asset.
In a letter to Bailey in June, Tice accused the BoE over overseeing a “systemic misuse of taxpayers’ money” through its decision to “voluntarily” pay interest on the reserves that built up during rounds of bond buying.
The BoE is now reducing its holdings of government debt, both by allowing it to mature without reinvesting it, and through active sales. Last week, the central bank’s Monetary Policy Committee voted to slow the pace of QT from £100bn to £70bn a year.
In response to Tice’s letter, Bailey said later in June that any decision to cease paying interest on reserves should only be “imposed by the elected government of the day” because it would be “akin to a tax on banks”.
The BoE’s approach to QE and QT, Bailey said in his own letter, should be judged by its success in supporting the economy, rather than the direct cost to taxpayers. The Treasury indemnifies the BoE for the losses it is likely to sustain as it reduces its bond holdings.
After Thursday’s meeting, Tice said he would write to chancellor Rachel Reeves and Alan Campbell, leader of the House of Commons, to request an urgent debate once MPs returned from recess in October.
“If parliament doesn’t take a proper role in this debate, it’s putting more pressure — and unreasonable pressure — on the governor and the Monetary Policy Committee without a proper steer from parliament,” he added.
Tice stressed that in the “very friendly, amicable, civil and constructive” meeting he did not demand that Bailey cut interest rates more quickly. “That’s not our job and it’s important that no one would think that it is,” he said.
The BoE last week held its benchmark rate at 4 per cent and signalled it would not hurry to cut interest rates again, amid concerns about continuing inflationary pressures.
Farage used Thursday’s meeting to raise the BoE’s position on cryptocurrency and press Bailey to take a more forward-looking approach to the digital currency.
Farage has previously said his party, if it won power, would slash the capital gains tax rate for crypto assets from 24 per cent now to 10 per cent, while creating a national bitcoin reserve at the BoE to stockpile crypto assets.
Tice said Bailey acknowledged the points raised, said it was a “matter of transition” and stressed the need to ensure cryptocurrencies were of a high quality.
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