The Term Funding Scheme (TFS) was introduced by the Bank of England last year as one of a series of measures designed to keep the economy moving following the shock of the Brexit vote. It essentially provides banks with cheap funding, to ensure borrowing costs remain low.

Now Simon Ward, economist at Janus Henderson, has called for the scheme to be closed as it makes the Bank look like it is pursuing “contradictory policies”.

He told The Times: “[The Bank of England] say markets are too dovish but deposits and lending rates are being suppressed by the TFS. They are saying rates will be higher but then keeping them down. It should be closed now.”

The TFS is due to close in February 2018, though banks will be able to benefit from the funding until 2022. It was extended earlier this month from its initial £100bn to £115bn.

It is in many ways a replacement for the Funding for Lending Scheme, which was launched by the Bank of England in 2012 in an attempt to keep lenders active.

Anna Bowes, director of Savings Champion, said that it was great that prominent financial figures were calling for the scheme to be closed early.

She said: “The funding for lending scheme was extended repeatedly and the knock on effect was the race to the bottom of the savings best buy tables as there was suddenly no need for the big guys to raise funds from savers. We would never have seen rate cutting to that extent without it; it changed the savings landscape to what we have today. The challenger banks have been the sole saving grace, providing the only competition for savers’ money that we see now.”

Data from financial information site Moneyfacts released earlier this month made clear just how dramatic the impact of these funding schemes had been on the savings market, as the table below demonstrates:

Source: Moneyfacts

Rachel Springall, finance expert at Moneyfacts, said that while scrapping the TFS early would be a positive for the savings market, it’s unlikely that it would recover overnight.

She said: “Clearly the government lending initiatives of both the Funding for Lending Scheme and Term Funding Scheme have served their purpose, but like a double-edged sword, they created havoc in the savings market. Savers are likely to have a few more years of low interest rates ahead of them and combined with inflation eroding their hard-earned cash, it wouldn’t be too surprising to find this is deterring people from putting money aside.”