Andy Burnham is facing calls to impose a tax increase on major banks as projections suggest that the UK’s largest lenders are on track to generate profits of approximately £55 billion this year.
Critics argue that banks are reaping significant benefits from the current cost of living crisis, capitalizing on higher interest rates and earnings from reserves held at the Bank of England. They are now seeking to persuade the new Prime Minister, Andy Burnham, and Chancellor John Healey to take decisive action.
The push for a tax hike is expected to intensify with the upcoming release of half-year results from banks, confirming another round of substantial profits. Barclays is set to kick off the reporting season, with analysts predicting a £700 million profit increase in the first half of 2026, reaching £5.9 billion compared to £5.2 billion the previous year. Following Barclays, Lloyds Banking Group and NatWest are also anticipated to announce robust profits in the coming days.
Collectively, the four major banks are forecasted to amass profits of £55.3 billion for the entire year, a significant rise from the previous year.
Sara Hall, co-executive director at Positive Money, emphasized the need to address banks’ profits amid the cost of living crisis. She highlighted that higher interest rates have enabled banks to extract profits from both customers and the Treasury, underscoring the urgency for the government to take action.
The Trade Union Congress (TUC) has proposed increasing the surcharge on banks’ profits from 3% to 8%, potentially raising £9 billion over four years. The TUC further suggested that doubling the surcharge to 16% or setting it at 35% could generate substantial tax revenues, aiding in alleviating the cost of living crisis.
TUC General Secretary Paul Nowak emphasized the importance of utilizing banks’ profits to alleviate financial burdens for households, portraying it as a matter of equity and social responsibility.
On the contrary, Lord O’Neill cautioned against imposing additional taxes on businesses, expressing concerns about the potential impact on the economy.
Recent data revealed that banks distributed £16.4 billion in bonuses in the first quarter of this year, further fueling the debate on bank profits and taxation.
In response to the calls for a tax hike, a spokesperson for UK Finance, the banks’ trade body, highlighted the substantial tax contributions made by the banking sector and raised concerns about the potential adverse effects of increasing sector-specific taxes on the UK’s competitiveness and investment attraction.
The proposed tax adjustments aim to support the government’s commitment to addressing the cost of living crisis and providing relief to households across the country.