Bank battle: history suggests Burnham faces fight if he opts for windfall tax
UK banks have reported soaring profits, with calls growing for a windfall tax to help ease cost of living pressures on households. Campaigners say raising taxes on bank earnings could yield £19bn, helping to offset the prime minister Andy Burnham's plans to slash living c…
Intelligence analysis by Llama
UK banks have reported record profits, with campaigners calling for a windfall tax to help ease cost of living pressures. The tax could yield £19bn, helping to fund the prime minister's plans to slash living costs and overhaul social care.
Imagine you borrowed money from a friend to buy a house, but then you made a lot of money and didn't pay your friend back. The government is saying that the big banks should pay more taxes because they made a lot of money too. This could help people who are struggling to pay their bills.
Analysis
A £19bn Windfall Awaits: The Case for a Bank Tax
The UK's four largest lenders – HSBC, NatWest, Barclays, and Lloyds – have reported a combined £29.2bn in profits over the first six months of the year. This has sparked calls for a windfall tax on banks, which could yield £19bn from the big four banks alone. The TUC's general secretary, Paul Nowak, has urged the new prime minister Andy Burnham to 'break with his predecessors' and impose a windfall tax on bank profits. This would allow the government to reclaim billions of pounds and fund life-changing support for households and businesses struggling to pay their bills.
The City's Battle Plan: Lobbying and Threats
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. Some influential executives have already fired warning shots, saying crucial lending could be throttled and that lucrative investments could be on the line. Jamie Dimon, the chief executive of JP Morgan, has said that the bank paid £7.4bn in extra taxes and that if that happens too much, they will reconsider. The NatWest chief executive, Paul Thwaite, has also said that tax rises would hold back lending and harm the economy.
A History of Controversy: The Bank Levy
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. The bank levy, imposed by the then chancellor George Osborne in 2010, was based on proposals by the International Monetary Fund. However, bosses went on the attack, with HSBC's then chief executive, Stuart Gulliver, revealing that the bank was considering shifting its headquarters out of the UK to Hong Kong. Osborne backed off, scaling back the bank levy to ensure it covered only UK-based balance sheets – rather than global assets – in a direct boost to HSBC.
Key points
- UK banks have reported record profits, with calls growing for a windfall tax to help ease cost of living pressures.
- A windfall tax on banks could yield £19bn, helping to fund the prime minister's plans to slash living costs and overhaul social care.
- 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.
If the government imposes a windfall tax on banks, it could raise £19bn and help fund the prime minister's plans to slash living costs and overhaul social care. This could have a significant impact on the lives of households struggling to pay their bills and could be a key step towards a more equitable economy.
The City's lobby machine will likely fight hard against a windfall tax on banks, and some executives have already threatened to reconsider their investments in the UK. If the government imposes a tax that is too high, it could lead to a decrease in lending and harm the economy.
