In a moral way, the Bank can ease our financial pain

It is focused on interest paid out of large reserves held by commercial banks Bank England overnight. Reducing or stopping payments could raise tens of billions.

Interest rates have risen, meaning lenders are getting a higher return on the more than £800bn they have invested in the Bank. But it is there money they received as part of the quantitative easing, or QE, program launched by the Bank to provide financial stability and economic stimulus after the banking crash 14 years ago.

In other words, it was a bailout caused by their own greed. Starting in 2009, QE went on too long and the banks came to see it as a fantastic profit. The least they could do now is throw up their hands and acknowledge the moral case for paying up.

They currently earn interest on these “reserves” at the Bank’s official rate of 2.25 percent. This could be reduced or reduced to zero. The banks say it’s a “hidden tax”, but it was money pumped into the system after their appalling behavior nearly brought global markets to their knees.

Rather than being seen as an emergency stop as intended, QE became a permanent feature, used to address various episodes of financial turbulence as they arose in subsequent years, and taken for granted. Banks couldn’t believe their luck.

Of course, they bleat the usual arguments. Hitting them in this way would mean they would have to recoup their lost profits in other ways, passing the cost on to the consumer. This will cause UK banks to suffer compared to their European and US rivals.

To which the polite answer is “phew”. There are much rougher ones.

It was an incredibly easy profit. It required no risk or hard yards. It has been compared to someone finding a pile of money behind the sofa – in other words, manna from heaven. And all because, let’s not lose sight of it, they were so careless and imprudent in the first place.

Unfortunately, the man who is supposed to support the idea of ​​targeting QE, Bank Governor Andrew Bailey, doesn’t want to know. Within the huge walls of the Bank, it became a totemic problem, a matter of principle. “This is a tax on the banking system. This is not monetary policy; it’s fiscal policy,” Bailey said.

Yes, it’s a tax on the banking system, and what’s wrong with that? Yes, it is fiscal policy. Again, so what? He does not like this because it would lead to the Bank being used as an instrument of taxation and thus infringing on the independence he so values.

Again, yes, but. QE was never designed to have such a lasting effect. This left a lot of money for the banks to make for doing nothing – in fact, come to think of it, for doing something reprehensible and almost bringing the whole system down. And “yes, but it is necessary.”

Kwasi Kwarteng vetoed the move when he was chancellor. He bought the claim, the Treasury said, it was an “additional tax on the banks” and would make it look as if the UK had decided not to pay interest on debt just because rates had risen. This would jeopardize the credibility of the UK – no euro zone, USA, Canada or Japan have done the same.

It’s hard to see how the QE rate cut income qualifies as a “tax”. As for the latter statement, you can bet that if the UK goes first, the rest will follow.

At the risk of repetition, it is morally unjustifiable. As far as the banks are concerned, this should be a crucial point.