A recent analysis indicates that implementing a windfall tax on major banks in the UK could generate over £11 billion in revenue for the Treasury. Chancellor Rachel Reeves is facing pressure to increase taxes in the upcoming Budget to address financial gaps. One proposed solution is to raise levies on banks, which have profited from high interest rates.
HSBC, the final of the Big Four banks to report its half-year profits, earned nearly £12 billion globally despite a 25% decrease from the previous year. Alongside Lloyds Banking Group, NatWest, and Barclays, these banks collectively amassed £24 billion in just six months and are on track to reach a record £48 billion by the end of the year.
Positive Money, a think tank, is advocating for a new surcharge of 38% on banks, similar to the Energy Profits Levy on oil and gas companies. This move is projected to generate £11.3 billion from the Big Four banks this year, potentially covering the costs of welfare changes. Positive Money also suggests that banks have benefited from higher interest rates set by the Bank of England.
The proposal mirrors Spain’s approach with a levy targeting banks’ domestic retail banking profits exceeding £800 million. Simon Youel, Head of Policy and Advocacy at Positive Money, emphasizes the need to hold banks accountable for their substantial profits, likening banking services to essential public utilities.
While industry leaders warn against taxing banks, citing potential impacts on lending and economic growth, Positive Money argues that such measures are necessary to prevent excessive profits. The Tories previously introduced a surcharge on bank corporation tax, generating significant revenue for the Treasury.
Positive Money is not advocating for an increase in the existing 3% surcharge but rather for a new levy targeting banks’ retail arms. This levy, set at 38%, would apply to net interest income above £800 million. Trade body UK Finance highlights the substantial tax contributions made by the banking sector, emphasizing the importance of balancing taxation with industry competitiveness.
