Barclays Has a Plan to Ease the UK’s Fiscal Woes

The UK government could reduce its borrowing costs if the Bank of England allowed British lenders to own more government bonds without needing more capital and so hurting their returns. That at least is the pitch from policy wonks at Barclays Plc, who reckon their proposal could save the taxpayer about £2.5 billion ($3.4 billion) in interest payments each year.

In a paper last week, Barclays’s policy development team estimated that British banks could invest as much as £150 billion more in gilts if they were able to exclude them from a key measure of how their balance sheets are assessed, thus incentivizing them switch to government debt from cash. The extra demand, it claims, would lower yields and so cut costs for government.