I’ve this letter in The Guardian at present:

As your editorial (13 July) notes, the federal government wants just a bit further funding to satisfy the pay and situations calls for of public sector staff which can be essential to the retention and recruitment of workers. You counsel further tax costs, however there may be one other manner to do that.

The federal government created about £900bn of recent cash to pay for the banking crises. To maneuver this new cash from the federal government sector, the place it was created, to the non-public sector, the place it was used, the Financial institution of England transferred that cash to the UK’s business banks.

The banks did nothing to earn this cash, and but they’re nonetheless paid the Financial institution of England base rate of interest on the full sums they maintain. When rates of interest have been underneath 1%, as they have been from 2009 to 2021, these curiosity prices have been insignificant. Now that the base fee is 5%, the sum paid has soared to greater than £40bn a 12 months.

There is no such thing as a want for the Financial institution to pay base fee on all these deposits. To make sure the effectiveness of its rate of interest coverage it must pay base fee on a few of them. Curiosity on £200bn needs to be sufficient to do that. The remainder may get pleasure from curiosity at a really a lot decrease fee: 0.1% ought to do. Japan and the eurozone already use such a two-tier rate of interest system. If executed right here this could save round £30bn per 12 months which is sufficient to meet all pay calls for now being fabricated from the federal government.

Richard Murphy

Professor of accounting observe, Sheffield College Administration Faculty