The suggestion has come from a leading economist, who has claimed that the government could use the “accumulated profits from quantitative easing to finance a special temporary tax cut for a year or two” after official figures revealed the potential profit by February next year from quantitative easing to the Bank of England would be around £20.7 billion, which it is claimed is more than enough to knock 2.5 pence off income tax for a year.
The economist has added that in an effort to avoid damage to the credit rating, the government could reclaim the profits from quantitative easing, claiming that “the superficial attraction of this proposal for the government is clear: recycling this money to voters rather than leaving it idle at the Bank.”
However, despite the official figures revealing that the profits from the quantitative easing programme would reach the £20 billion mark, the Bank of England are said to be sitting on the profits because it bought gilts with money it has effectively printed; and the gilts pay interest which is collected from the government.
Although the arrangement means the funds are effectively moved from one arm of the government to another, it is still recorded as a normal payment.
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