Nigel Farage has renewed his threat to deprive commercial banks of billions of pounds in interest payments from the Bank of England, reviving a controversial proposal that has already worried financial markets and the banking industry.
At a Bloomberg event on the sidelines of the World Economic Forum, Farage confirmed that Reform UK still intends to abolish interest on reserves held by banks at the central bank, money created in the era of quantitative easing.
Asked whether the proposal, first set out in Reform UK’s 2024 manifesto, remained party policy, Farage replied bluntly: “We will do it.”
“Some banks won’t like it,” he added. “Well, I don’t particularly like the banks for depriving me, do you? That will be hard for the banks to accept, but the strain on public finances is just too great.”
Farage rejected claims that the move amounted to a new bank tax, insisting instead that lenders were unfairly benefiting from central bank policy. “They’re just not going to get free money anymore,” he said.
Under current arrangements, commercial banks earn interest on the reserves they hold with the Bank of England, a mechanism for transmitting monetary policy. Critics of the system argue that it has led to large, politically sensitive transfers from the public sector to the banking sector as interest rates rise.
At the time of the general election, banking groups warned that scrapping the payments could have “real consequences” for financial stability, credit conditions and investor confidence in the UK.
Asked why bond investors appeared uncertain about the prospect of a reform government in the UK, Farage dismissed market concerns and suggested he would take a contrarian approach.
“As a former commodities trader, I take the opposite trading position when there is a large consensus,” he said. “I’ve always really believed in that.”
Farage also sought to draw lessons from the market turmoil that followed the 2022 mini-budget under former Prime Minister Liz Truss and Chancellor Kwasi Kwarteng.
“The big lesson is that they have not proposed any spending cuts,” he said. “For our program to work, we absolutely need to tell people that we are going to reduce social spending and cut excessive government spending. If we do that, I think the markets will applaud it.”
Farage also revealed that he had recently met Andrew Bailey, describing the encounter as “a very interesting clash of cultures”.
The renewed proposal is likely to reignite debate over the independence of the Bank of England and the relationship between monetary policy and fiscal decision-making, particularly as political control of bank profits and public finances intensifies ahead of the next phase of the economic cycle.
