RISHI SUNAK fuelled today’s expected interest rate rise by bailing out bankers, bosses and the asset-owning classes during the pandemic and saddling ordinary taxpayers with the bill, experts have said.

Labour, campaigners and academics criticised the Tories’ fiscal policies and unnecessary high interest rates yesterday after official figures showed UK spent £56bn more in debt interest than the G7 average between 2019 and 2022.

Banks and energy giants have been posting record profits during the cost-of-living crisis this year, and the investment banker turned prime minister was also blasted for claiming yesterday that “people can see the end of the tunnel” over his administration’s crippling interest rate hikes.

Labour said his choice to ignore warnings against riskier debt issuance during the pandemic “means that the UK now issues far more index-linked gilts than other G7 countries, over twice as much as a share as the second-placed country which is Italy.”

But Sheffield University professor Richard Murphy told the Morning Star: “Labour is right to say that the costs of financing Covid are too high, but they have the reasons wrong.”

He said the Bank of England is paying interest at a base rate for accounts it is holding in commercial banks which were “effectively fitted to them by quantitative easing (QE).

“This year the cost of that will be £40bn. The government is paying these banks to hold money the government created to, in no small part, save those banks in both 2008 and 2020,” he added. “That makes no sense and is neither legally required or done in Europe and Japan. It could cut these interest payments by maybe £30bn a year, with ease.”

Prof Murphy, who believes the Bank should cut interest rates by at least 1 per cent today as it is apparent that inflation is now falling, agreed that the use of QE achieved a bailout for the asset-owning classes — though he believes they were saved incidentally.

Simon Youel, head of policy & advocacy at Positive Money, criticised the  government’s unnecessarily high interest costs, telling the Morning Star: “QE was originally used to stop a crisis in government debt markets during the pandemic, but it also allowed the government to spend much more without taxing the rich.

“So QE can be considered a bailout for the asset-owning classes as it pushes up the value of their assets, which is why it needs to be accompanied by proper taxation of wealth.

“A significant reason for the surge in debt servicing costs is the fact the Bank pays interest on the huge stock of central bank reserves that have been created through quantitative easing.

“The Bank is expected to pay £75bn to banks over 2023 and 2024 just for sitting on risk-free reserves — the cost of which is backstopped by the government, the way things currently work.

“It is therefore unsurprising that banks are recording record profits as they are being paid huge windfalls that could otherwise be spent on public services and supporting people through the cost-of-living crisis.

“Unfortunately, policymakers seem intent on economic policy that benefits banks and the rich while making the cost-of-living crisis worse for ordinary households.”

On the huge profits seen by banks, Unite union general secretary Sharon Graham told the Star: “Rishi Sunak has a barefaced cheek; people are increasingly unable to pay household bills because of the cost-of-living crisis his government has created and made worse through its inaction.

“The economy is simply not working for everyday people. Until profiteering is tackled, there can be no respite from high inflation.”

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “The PM may see ‘light at the end of the tunnel’ but he must be the only person in the country who can. Record-high energy bills will continue into mid-next year according to experts, and the levels of household energy debt are soaring. People just can’t cope.”

The government’s green policy also came under fire yesterday as Energy Secretary Grant Shapps met energy firm bosses to discuss economic growth and energy security.

Mr Francis said: “His government’s plan to increase North Sea oil and gas production will do precisely nothing to cut UK energy bills and help UK households. All it will do is increase the already obscene profits of huge international oil and gas companies.”