The Bank of England should carry out its threat to penalise high street lenders by cutting the interest it pays on cash held by them in its reserve accounts, The Times monetary policy committee (MPC) recommends.

The plan was mooted last month by Mervyn King, the Bank Governor, as part of efforts to encourage lenders to inject more money into the financial system.

Four of the nine-member panel of economic experts on The Times MPC thought that the Bank should press ahead with the plan.

Professor Charles Goodhart, of the London School of Economics, the most fervent backer of the scheme, said that the cash balances “piled up at the Bank of England” were “socially useless” and that the Bank should impose a negative interest rate on money held by each bank in excess of 2 per cent of their total assets.

HSBC, Royal Bank of Scotland, Barclays, Lloyds and Northern Rock held a total of £157 billion in central bank reserves at June 30, up from £90.6 billion at the end of 2008.

Sushil Wadhwani, a former external member of the Bank’s MPC, Rupert Pennant-Rea, a former Deputy Governor of the Bank of England, and Sir Steve Robson, former Second Permanent Secretary at the Treasury, also lent their backing to the plan.

However, Sir Alan Budd, former chief economic adviser to the Treasury, Martin Weale, director of the National Institute of Economic and Social Research, and Bronwyn Curtis, head of global research at HSBC, said that the Bank should not carry out its threat. Anatole Kaletsky, chief economics commentator at The Times, and Geoffrey Dicks, former chief UK economist at RBS, remained uncommitted.

Otherwise the panel was united in its call for interest rates to be kept unchanged at 0.5 per cent, where they have remained for five consecutive months, and for the Bank’s drive to jump-start the economy with huge injections of newly printed money to be halted for now with burgeoning signs that the recession is coming to an end. Many were surprised by the Bank’s decision last month to pump a fresh £50 billion into the economy to ensure that the recovery continued.

The decision to extend its programme of quantitative easing from £125 billion to £175 billion broke the ceiling set by the Chancellor of £150 billion.

Professor Goodhart said that the Bank’s quantitative easing programme had been “short-circuited by the banks piling up huge deposit balances at the Bank of England rather than using them to buy additional assets or to make loans”.

Mr Pennant-Rea said that the Bank should adopt a gradual stance towards cuts in the rate on reserves. “That would mean ... moving in small amounts — several small cuts rather than one big jump to the ideal rate,” he said.

Mr Wadhwani said he was “yet to be persuaded” that cutting the rate paid on the reserves would increase lending volumes. He added, however, that “the Governor’s remarks have led the markets to expect a change here — any disappointment would now lead to an unwelcome strengthening of sterling”.

Sir Alan said that there was “no need” for the Bank to cut the interest rates on the money held by lenders in its reserve accounts, while Ms Curtis said she was “unconvinced that reducing the deposit rate will make a meaningful difference to lending”.

She added that announcing further policy action this month “could undermine confidence as people question what the central bank knows that they don’t.”

Mr Weale said that the Bank would do better to look at ways of “promoting use of commercial paper and other forms of credit”.

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