Reform UK will urge Rachel Reeves to overhaul the Bank of England’s money-printing programme to gain a £20bn lifeline ahead of the Budget.

Richard Tice, Reform’s deputy leader, is writing to Ms Reeves and the leader of the House of Commons to request an urgent debate on the issue following a meeting with Andrew Bailey, the Bank’s Governor, on Thursday.

The party claims the Treasury could save billions by changing the terms of the programme, which saw the Bank create enough money to buy £895bn of UK bonds to prop up the economy during the financial crisis and Covid.

The Bank made almost £125bn of profits on those bonds, which it agreed to transfer to the Treasury. However, the Treasury also agreed to cover any losses, which have escalated since 2022 thanks to higher interest rates and a fall in the value of the bonds, which the Bank is now selling.

By stopping those bond sales and paying less interest on the money it printed, Reform believes the Bank can save £20bn per year for the public purse.

The party said it that if won power, it would use any savings from the reforms to help raise the tax-free allowance to £20,000 and cut corporation tax.

Mr Tice believes the unwinding of the Bank’s money-printing programme – known as quantitative tightening (QT) – is pushing up borrowing costs and piling pressure on the public finances by selling bonds at a loss.

He described the meeting at the Bank of England as “very civil, polite and courteous”, adding that “[Mr Bailey] really appreciates the interest and welcomes the public debate”.

Mr Tice said: “[Mr Bailey] quite properly said these are political issues and he completely accepts that politicians could give him a different steer. The Monetary Policy Committee have been slightly left on their own by government to make these big decisions, which is slightly unfair on them.”

He and Nigel Farage, the Reform UK leader, also urged the Governor to cut interest rates from their current level of 4pc to boost the economy.

The New Economics Foundation (Nef), a Left-leaning think tank, also urged the Treasury on Thursday to change the terms of QT to allow Threadneedle Street to absorb losses on its balance sheet instead of taking the £20bn annual hit to the public purse.

The Nef warned that the Bank’s losses are now so large that it “constrains fiscal policy choices” for the Chancellor, which “is especially toxic when fiscal rules are binding and used as justification for austerity”.

It comes as Ms Reeves faces a black hole in the finances which economists estimate at around £30bn.

Removing the £20bn annual flow to the Bank of England would plug much of the gap and is on par with the money Ms Reeves might otherwise seek from major tax changes, such as a raid on income tax.

“The Bank of England has found itself under attack from all angles, with critics pointing to its eye-watering cost to the Treasury. Reducing its financial dependence on the government may be the Bank’s best defence,” said Dominic Caddick, a Nef economist.

“Instead of billing the Treasury for its losses, the Bank of England could begin to absorb its losses itself. Abolishing the Osborne-era agreement for the Treasury to cover the Bank’s losses would bring us in line with the US and Eurozone, without risks to the Bank’s operations.”

This would emulate the approach of the European Central Bank and the US Federal Reserve. They plan to use their usual day-to-day profits to pay down the loss over the years to come, spreading the cost over a much longer period.

The Nef also called for other changes to the system to limit any losses which the Bank keeps on its balance sheet, including by reducing the payment of interest to commercial banks and more closely coordinating policy between the Bank and the Treasury.

The think tank joins a growing chorus of voices on both the Left and Right for the Treasury and Bank to shake up its money printing programme to limit losses for the taxpayer.

Last month, the Institute for Public Policy Research (IPPR), another think tank, urged Ms Reeves to follow Margaret Thatcher and impose a new tax on banks, copying a levy in the 1980s when rising interest rates gave lenders a windfall.

It said Ms Reeves could generate £8bn a year by introducing a new tax on reserves held at the Bank by commercial lenders. In addition, the Chancellor could recoup a further £12bn by pushing the Bank to stop selling bonds at a loss under QT.

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