It has been a stellar week for UK banks. Fuelled by high interest rates and market turbulence rippling out from the US war on Iran, major lenders have revealed soaring half-year profits that allowed bosses to boost bonus pots and give billions of pounds to shareholders.<\/p>\n
Collectively, the UK\u2019s four largest lenders \u2013 HSBC, NatWest, Barclays and Lloyds \u2013 reported \u00a329.2bn in profits<\/a> over the first six months of the year, with almost half, \u00a313.7bn, pledged to investors through dividends and share buybacks.<\/p>\n Those bumper figures have turbocharged calls for a tax increase on banks. Campaigners say raising taxes on their earnings could yield \u00a319bn from the big four banks alone<\/a>, helping to offset the price of the prime minister Andy Burnham\u2019s ambitious plans to slash living costs and overhaul the UK\u2019s social care system.<\/p>\n \u201cThis is not a \u2018hard choice\u2019,\u201d the TUC\u2019s general secretary, Paul Nowak, said last week. \u201cBanks can easily afford to pay more tax. This is a chance for the new prime minister and chancellor to show whose side they\u2019re on.\u201d<\/p>\n The campaign group Positive Money echoed those sentiments, saying: \u201cWe\u2019re calling on Andy Burnham<\/a> to break with his predecessors by resisting the demands of City lobbyists and reclaiming these lost billions with a windfall tax on bank profits, the proceeds of which could be used to fund truly life-changing support for the households and businesses struggling to pay their bills right now.\u201d<\/p>\n Campaigners have urged Andy Burnham to \u2018break with his predecessors by resisting the demands of City lobbyists and reclaiming these lost billions with a windfall tax on bank profits\u2019. Photograph: Jack Taylor\/Reuters<\/p>\n Burnham has not made any specific comments about a bank tax so far. However, in June he said people needed help now with rising costs. \u201cWhile not taking risks with the public finances, [I] will seek to give Britain some breathing space as soon as I can,\u201d he said.<\/p>\n The TUC\u2019s Nowak said: \u201cAndy Burnham has rightly prioritised cost of living measures in his first days as prime minister, but as the war in Iran rumbles on, energy prices will rise further \u2013 and the government will need to do more to protect households. That\u2019s why it\u2019s time to increase the tax on bank profits to cut bills.\u201d<\/p>\n So the City is steeled for battle, having spent the better part of two decades fighting the levies it was forced to shoulder as recompense for the disastrous 2008 banking meltdown.<\/p>\n Some influential executives have already fired warning shots, saying crucial lending could be throttled and that lucrative investments \u2013 such as JP Morgan\u2019s \u00a33bn Canary Wharf HQ<\/a> \u2013 could be on the line. \u201cWe paid probably $10bn (\u00a37.4bn) in extra taxes by now, I don\u2019t think that\u2019s right or fair. If that happens too much, we will reconsider,\u201d the Wall Street bank\u2019s chief executive, Jamie Dimon, said.<\/p>\n The NatWest chief executive, Paul Thwaite, said tax rises would hold back lending and harm the economy. As he reported a 29% profit increase, he said: \u201cIf you want strong economies, you want strong banks. It\u2019s really important to have consistency and stability of policies.\u201d<\/p>\n Barclays said its loans would be crucial to supporting Burnham\u2019s growth agenda, suggesting any constraints on its finances could weigh on the funding available to business and consumers.<\/p>\n \u201cWe think that the track record that we and the other banks have, in terms of supporting UK growth and indeed leaning into UK lending in the way we have \u2026 is really important for the health of the economy,\u201d the chief financial officer, Anna Cross, said last week. \u201cWe hope that that will be considered.\u201d<\/p>\n The banks\u2019 lobby machine will now be keen to prove that Burnham\u2019s growth plans could be dead in the water without the City\u2019s support.<\/p>\n Windfall taxes on banks have long been controversial, even as bank bosses have struggled to shake off the reputational damage of the 2008 financial crisis.<\/p>\n Left to clean up the mess from a series of taxpayer-funded bailouts, Tory ministers in the coalition government saw banks as an easy target for fresh taxes, at the same time as they embarked on a period of state austerity.<\/p>\n First came the bank levy, which the then chancellor, George Osborne, imposed on the industry as part of an emergency budget held weeks after the Cameron-Clegg coalition government took power in May 2010. The measure, based on proposals by the International Monetary Fund, looked to recoup billions of pounds from the UK\u2019s largest banks by taxing a portion of their balance sheets.<\/p>\n However, bosses went on the attack. By 2015, HSBC\u2019s then chief executive, Stuart Gulliver, incensed by the growing regulatory burdens and the \u00a3700m annual charge of the bank levy, revealed that the bank was considering shifting its headquarters out of the UK to Hong Kong. \u201cThis is not a threat, it\u2019s a very objective review,\u201d Gulliver said.<\/p>\n Spooked by the prospect of losing one of the City\u2019s most important lenders, Osborne backed off, scaling back the bank levy to ensure it covered only UK-based balance sheets \u2013 rather than global assets \u2013 in a direct boost to HSBC.<\/p>\n George Osborne scaled back the bank levy when he was the chancellor. Photograph: Neil Hall\/PA<\/p>\n Osborne also bowed to banks\u2019 complaints that the levy had been raised too often and without warning, agreeing to reduce the rate from 0.21% to 0.10%, in a move that would halve annual tax takings from \u00a38bn to \u00a34bn.<\/p>\n But he had another tool at the ready, albeit one meant to spread the tax burden more widely across the sector, with an 8% charge on banks\u2019 profits.<\/p>\n A later chancellor, Rishi Sunak, pledged to slash this charge<\/a> to 3% from April 2023, amid growing concerns that Brexit was putting London at a disadvantage to other big financial centres such as New York and Hong Kong.<\/p>\n However, a post-Covid rise in interest rates and a resulting cost of living crisis as inflation soared to 11% put bank profits back in the public\u2019s crosshairs.<\/p>\n In July 2023, MPs on the Treasury committee lambasted City bosses, accusing lenders of profiteering<\/a> and failing in their social duty while consumers suffered.<\/p>\n Pressure mounted in the UK as governments across mainland Europe, including Italy and Spain, imposed windfall taxes on banks in order to support struggling households.<\/p>\n The looming threat of increased taxes put banks back on the defensive, with the Lloyds Banking Group chief executive, Charlie Nunn, urging policymakers to keep their hands off profits<\/a>.<\/p>\n double quotation markCampaigners and thinktanks have offered creative alternatives to claw cash from the big banks<\/p>\n