Britain is in the midst of a cost of living crisis with high levels of government borrowing and increasing interest rates to combat high inflation. Under the floor system, the Bank of England currently renumerates all commercial bank reserves held with them at bank rate, the official short term interest rate set by the Monetary Policy Committee. This has meant that commercial banks have been benefitting from higher interest rates as they receive more interest on their reserves .
Is it time for the interest payments on commercial bank reserves to be taken as government tax revenue to help fill fiscal gaps? This presentation and report looks at different policy options for restructuring the reserve system.
