The TUC says there is a “mountain of evidence” for new PM Andy Burnham and Chancellor John Healey to announce a windfall tax on banks’ booming profits in the autumn Budget
Andy Burnham is facing mounting calls to hit big banks with a windfall tax after a more than £29billion profit bonanza.
HSBC added to a backlash yesterday (Tues) as it announced half year profits surged by almost a quarter to £14.5billion. It follows a bumper round of results from rivals Lloyds Banking Group, Barclays and NatWest over the past week. The ‘big four’ have collectively made over £29billion this year, on track for an estimated annual £55.3billion haul – equivalent to around £1,750 every second.
The eye-watering earnings have been partly fuelled by the Middle East war, which has driven up inflation and meant interest rates have stayed elevated for longer. While that has fattened banks’ profits, it has meant higher energy and other household bills, worsening the ongoing cost of living crisis for millions of UK families and pushing up UK government borrowing costs.
Banks aren’t alone in benefiting from the crisis as ordinary households are left reeling from the financial fall-out.
Today also saw oil giant BP announce profits more than doubled to £6.6billion in the first half of this year, including £4.2billion in the three months to June. The firm’s biggest quarterly haul since 2022 and Russia’s invasion of Ukraine was boosted by a leap in wholesale oil and gas prices on the back of the Middle East war.
Climate campaigners said the stellar earnings for BP and other energy firms come as large parts of the world are battling extreme temperatures, as they criticised fossil fuel firms for being part of the problem.
The TUC has called for a windfall tax on banks to help bring down energy bills for millions of UK households. The union body wants the government to use the money to pay for a social tariff that, it claims would bring down energy bills by up to £559 a year for those on low and middle incomes.
TUC General Secretary Paul Nowak said: “There is now a mountain of evidence to suggest that banks can easily afford to pay more tax. While higher interest rates have meant mortgage misery and bigger bills for the rest of us, the big banks have been rolling in it.
“Andy 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 – and the government will need to do more to protect households. That’s why it’s time to increase the tax on bank profits to cut bills. It’s common sense and it’s the right thing to do.”
The TUC is arguing for an increase in the 3% surcharge on banks’ profits, which is on top of the 25% corporation tax they pay. Upping it to 8% – reversing a cut by the Tories – could raise £9billion over four years, it says, while doubling it to 16% would rake in an estimated £24billion. A 35% surcharge, which would be the same level as the windfall tax the Conservatives imposed on energy companies, would deliver £60billion over four years, the TUC has already said.
Campaign group Positive Money claims a windfall tax on banks could raise up to £19billion from the big four banks alone in the first year if announced in the autumn Budget, enough to more than cover the cost of Mr Burnham’s VAT cut from electricity bills, the £2 cap on bus fares, and the business rates cut for pubs, clubs and music venues.
Sara Hall, co-executive director at Positive Money, said: “Interest rate rises have landed us in a lose-lose situation: not only have they proven ineffective at taming inflation coming from overseas pressures, they’ve also handed windfall profits to banks, directly at the public’s expense.
“Previous governments have allowed the powerful banking lobby to persuade them against taxing these record-breaking profits in recent years, despite overwhelming public support for the policy.
“We’re calling on Andy Burnham 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.”
Trade body UK Finance said the sector paid £43billion in taxes last year and warned hikes would “reduce UK competitiveness”.
A Treasury spokesperson said: “The Chancellor is fully focused on his priorities, which will boost business, help with the cost of living and support people in every postcode. As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on proposals made.”
Rosie Downes, Friends of the Earth’s head of campaigns, said of BP: “Clearly not everyone is feeling the pain of the energy crisis. While BP banks another round of enormous profits, millions of households are paying the price through sky-high energy bills and a climate crisis accelerating rapidly out of control with increasingly severe heatwaves, wildfires and droughts.”
BP’s second-quarter profit surged by 144% on higher oil and gas prices and strong refining margins. Oil majors have benefited this year from market volatility caused by the US-Iran conflict, which has disrupted energy flows and tightened global supplies.
BP last week put its North Sea business up for sale in a move that would end 60 years of production in the region by the oil giant.
Boss Meg O’Neill – who is in line for a potential £13.7million payout this year – told CNBC: “If we step back, the North Sea has been very important to BP for more than 50 years. It’s a great basin, high-quality oil and gas resources, but when we look at how it fits into our portfolio today, it just doesn’t compete for capital.”
