Nigel Farage has renewed his threat to strip commercial banks of billions of pounds in interest payments made by the Bank of England, reviving a controversial proposal that has already alarmed financial markets and the banking industry.
Speaking at a Bloomberg event on the fringes of the World Economic Forum, Farage confirmed that Reform UK still intends to scrap the interest paid on reserves held by banks at the central bank, money created during the era of quantitative easing.
Quizzed on whether the proposal, first outlined in Reform UK’s 2024 manifesto, remained party policy, Farage replied bluntly: “We are going to do it.”
“Some of the banks won’t like it,” he added. “Well, I don’t like the banks very much because they debanked me, didn’t they? This will be tough for banks to accept, but the drain on public finances is just too great.”
Farage rejected claims that the move amounted to a new tax on banks, insisting instead that lenders were benefiting unfairly from central bank policy. “They are just not going to get free money anymore,” he said.
Under current arrangements, commercial banks earn interest on the reserves they hold at the Bank of England, a mechanism designed to transmit monetary policy. Critics of the system argue it has resulted in large, politically sensitive transfers from the public purse to the banking sector as interest rates have risen.
At the time of the general election, banking groups warned that scrapping the payments could have “real consequences” for financial stability, lending conditions and investor confidence in the UK.
Asked why bond investors appeared uneasy about the prospect of a Reform UK government, Farage dismissed market concerns and suggested he would take a contrarian approach.
“As a former commodities trader, if there’s a big consensual view, take the opposite trade position,” he said. “I’ve always believed in that quite strongly.”
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 they did not propose to cut spending,” he said. “For our programme to work, we absolutely have to tell people that we are going to reduce welfare 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 scrutiny of bank profits and public finances intensifies ahead of the next phase of the economic cycle.
Read more:
Nigel Farage renews pledge to tax banks by scrapping Bank of England interest payments