The government is going to pay our commercial banks £136 billion of excess interest over the next five years on money the government gifted to them using the QE process. That’s £27bn a year that could be used in the NHS and education. This is outrageous. A thread….
The key issue to understand here is that when the government made almost £900 billion of new money using the QE process that got spent into the economy via our commercial banks, like Lloyds, Barclays and Santander.
What happened as a result was that these banks ended up with over £900 billion supposedly on deposit account with the Bank of England. They are being paid Bank of England base interest rate on these deposits.
In 2021 that bank base rate was 0.1%. Even in March this year it was expected to peak at around 2% and then fall to 1.25%. Now the Office for Budget Responsibility forecasts a peak of 5% and then only a slight decline to 4.25% by 2027.
I used this new interest rate forecast plus forecast falls in these deposit account balances because of (unlikely to happen) plans to reverse QE to forecast how much extra interest the banks will be paid over 5 years as a result of the increase in official interest rates.
The answer is £155 billion of extra interest due over five years.

Now, in practice I accept some might need to be paid for technical reasons. So I adjusted for that. The excess payment then became to £136 billion over five years.
That is £27 billion a year on average for the next five years that the government will be paying to the commercial banks on money they never earned but were instead given because of the QE process.
Let me put this in context. £27 billion a year also happens to be the amount of increased tax a year imposed yesterday. All of that is going to our banks. They are the only people gaining from it under Hunt’s plans.
Alternatively, £27 billion was the total cuts a year imposed yesterday. And what I am suggesting is that all of those cuts were made to ensure we can pay the banks what they are not owed, but which the government wants to pay them.
This is absurd. This interest need not be paid. There is no law requiring it. Pre-2008 nothing at all was paid on these balances. I reckon 0.1% on total balances over £100bn would be more than enough to fulfil the policy goal for making payments. And that would save £136 billion.
In other words we could, by simply denying the banks their unearned gains, provide enough to protect and reinvest in the NHS and to protect and invest in education.
The government has made a choice. They have decided banks should gain. As a result they have decided people will die and children will not get the future they deserve. And they have done that so that bankers can have massive bonuses on ill-gotten income.
I think this is wrong. I think it should be put right. I call on all politicians to stop these absurd and unnecessary payments to banks and to use the money for essential public services instead.
And for those who want the detail, my workings are here. taxresearch.org.uk/Blog/2022/11/1… Please complain. Please do so now. Tell your MP to change this, now.

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More from @RichardJMurphy

Nov 20
I had a long discussion with a radio producer yesterday on what I thought was wrong with the Autumn Statement. We discussed the numbers but what I said is most important is not what was said, but what was not. That’s where the frightening bits are. A thread…..
[This is a long thread: if it appears to stop mid flow click the last post you can see and the rest should appear.]
It was a very long time ago that I realised that when looking at financial data - whether accounts or economics information - the key thing to look for is what is not made available.
Read 44 tweets
Nov 17
Holding tax and national insurance allowances as they are is going to increase tax by over £400 for the average household next year. Add in £600 or more extra on fuel bills and everyone paying tax might be £1,000 worse off before we hear anything else from Hunt today.
Then there are the mortgage and rent rises that for many will be much bigger than these sums and could come to many thousands a year because of unnecessary interest rate rises, which Hunt is permitting. The outlook for 2023 that Hunt will be delivering is grim, by his choice.
On top of that, the Bank of England thinks recession will push up unemployment by at least a million people, and I suspect it could be more. Many small businesses (and larger ones too) might fail, alongside lots of public services because they will not be able to pay their bills.
Read 6 tweets
Nov 16
Inflation is simple to explain @RevRichardColes. It’s a measure of the increase in prices in a month compared to the previous year. It is high now as the impact of Putin’s war works through the economy. That war has lasted less than a year so far. A quick thread…..
What this means is that right now we are comparing prices after Putin’s war began with those before it began. And since the war has pushed up energy and food prices, especially, the inflation rate is high right now.
IWhen Putin’s war has lasted more than a year we will compare prices after the war began with earlier high prices from months also after the war began. That means the rate of inflation is mathematically bound to fall unless we get another massive shock like that again.
Read 7 tweets
Nov 14
The UK’s national debt is a strange figure. For example, to most people's surprise it includes all our notes and coins, as well as premium bonds. But much more worrying is the fact that a significant part of it is created by what I think to be dubious accounting. A thread…
[This is a long thread. If it appears to stop mid-flow click the last tweet you can see and the rest should appear or click ‘see more replies’]
The way the national debt is calculated makes a massive difference when it comes to calculating so-called ‘fiscal black holes’, which are the supposed reason why we need to have austerity and tax rises now. But some of the accounting for this debt is dubious, to say the least.
Read 35 tweets
Nov 13
Jeremy Hunt is saying we cannot max out the national credit card this morning. This is total nonsense. There is no national credit card. Instead it’s the job of government to make the money we use. And since it can always make that money it can never max out on credit.
Hunt wants you to believe that we max out the national credit card. But no gov’t can do that because it’s an organisation unlike any other, with it’s own bank, which means it has no credit limits. Instead, the question is should it be creating more money for the common good now?
The answer to that is that of course the government should be creating more money right now. When households have less to spend, and when business investment is falling so banks aren’t lending and exports are knackered by Brexit, only gov’t spending can get us out of recession.
Read 8 tweets
Nov 9
This thread is a reply to @westreeting. He responded with a series of tweets to comments I made yesterday. I am responding with a thread. If it appears to stop midstream click the last one you can see and the rest will appear…….
First, it’s a shame you started by calling me hysterical when very clearly the questions you responded to show that I am not. I attach the definition of being hysterical. I clearly am not what you described me as. Might you drop the hyperbole?
Second, it’s a shame your tweets are really hard to follow as they do not form a thread, which you could only have delivered by quote tweeting rather than replying to me. It’s a trick worth learning.
Read 22 tweets

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