Gordon Brown’s proposal to launch a stealth tax raid on banks would add hundreds of pounds to the cost of the average mortgage, analysis suggests.
Mr Brown, the former Labour leader, has led calls for the next government to overhaul the way the Bank of England pays interest to commercial lenders in a move that could save the taxpayer billions.
The former prime minister has proposed stopping interest payments on a proportion of reserves held by commercial banks at the Bank of England, saving the taxpayer as much as £3.3bn per year. The policy amounts to a stealth tax on banks.
In a report published last month, Mr Brown said: “Redirecting what, in a changing monetary environment, amounts to an unplanned subsidy to banks towards investment in the infrastructure that can support social partnerships to tackle poverty could make a huge difference.”
The former Labour leader’s advocacy has led to mounting speculation that the policy could be adopted by Labour, though shadow chancellor Rachel Reeves has insisted the party has “no plans” to do so.
Analysts warned that the change would prompt high street banks to either cut their savings offers or raise mortgage rates in an effort to protect profits.
Mr Brown’s proposal could add around £170 per year to the cost of repaying an average mortgage, according to analysis of industry data from UK Finance. A banking source described this as a “mortgage tax”.
The idea of changing the way the Bank pays interest has risen up the political agenda given the increasing cost to the taxpayer.
