Source · Select Committees · Treasury Committee
Recommendation 18
18
Not Addressed
Paragraph: 81
Committee does not support cutting remuneration of Bank reserves due to financial stability concerns
Conclusion
We have received proposals for interventions that would cut the remuneration of bank reserves and thereby reduce the ongoing losses arising from QE and QT. However, we have also received evidence that cutting remuneration now could be similar to a default, and that any scheme tied to commercial banks’ holdings of reserves could undermine financial stability. Overall, we do not support cutting the renumeration of Bank reserves. We believe taxes on banks should be set through Parliament in a Finance Bill.
Government Response Summary
The government discusses the cashflows between HM Treasury and the APF, highlighting the transparency of the Bank's reporting and the wider economic impacts of QE and QT. The response does not directly address the committee's conclusion that it does not support cutting the remuneration of Bank reserves.
Paragraph Reference:
81
Government Response
Not Addressed
HM Government
Not Addressed
The direction and magnitude of cashflows between HM Treasury and the APF is discussed at length in your report. In the past, there have been large cashflows from the APF to HM Treasury. In more recent times, the direction of those flows has reversed. This was expected at the time the arrangements governing the indemnity were put in place. The Bank has been fully transparent about APF cashflows and presents a set of cashflow projections in the APF Quarterly Reports. Future APF cashflows are highly uncertain, however, and are sensitive to several factors. It is also important to note that the fiscal implications of QE and QT are not simply captured by cashflows between the APF and HMT, but also through the wider impact of the policy on financial conditions and the economy. The OBR, for example, noted in November that its assessment of lifetime cashflows associated with QE and QT did not amount to an assessment of the overall fiscal, let alone economic, impacts of QE, which reduced borrowing costs, lowered unemployment, supported the economy and helped stem disinflationary pressures at various points over the past 15 years.