Banks have delivered booming profits for the first half of the year, but calls for a tax rise on the sector are getting louder under the new Prime Minister. The country’s top banks have danced to the beat of Rachel Reeves’ drum, but with Andy Burnham and newly-anointed Chancellor John Healey, the sector is singing from a different hymn sheet.
Bank Profits and Taxation
Top brass at the UK’s big four banks – Natwest, Lloyds, Barclays, and HSBC – were each pressed on whether they are worried about a tax raid. Charlie Nunn, the boss of Lloyds, refused to be drawn in on three different occasions.
Natwest’s Paul Thwaite said that a strong economy needs strong banks. They will have to wait and see what the new government has in store for them.
Devolution Ambitions
Andy Burnham has made no secret of his devolution ambitions, and bank bosses have rushed to join the party. HSBC boss Georges Elhedery stressed that the bank has operations all over the UK, employing people across its data centres in Sheffield, HSBC UK’s headquarters in Birmingham, and its biggest call centre in Swansea.
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Natwest’s Paul Thwaite shared a stage with Andy Burnham at the Great North Investment Summit in May, just before he made his return to Parliament. Thwaite announced a fresh £20bn of lending in the north as part of a regional growth effort.
The tax campaigners’ demand is still loud. Surging bank profit has done little to subdue the demand after each of the lenders surpassed expectations and a number upgraded to their income forecasts.
Tax Campaigners’ Demand
Activists at Positive Money have suggested a windfall tax could raise £19bn from the big four alone. The group blasted the £13.7bn paid out to shareholders by the quartet as evidence they can easily be paying more tax.
Dianne Abbott called for a tax hike after Barclays deepened its bonus pool. The government should increase bank taxes, and the government has plenty of ways to invest it.
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The new Chancellor has pledged fiscal discipline and to meet the spending rules set out by Reeves in his fiscal event, setting up a summer of speculation for how Burnham’s costly spending commitments will be met.
Banking chiefs haven’t quite leapt to tax defense mode yet, but signs of what kind of response would unfold are already there. Jamie Dimon, the boss of JP Morgan.
For now, the banks will have to wait and see what the new government has in store for them. The bank tax debate is likely to continue, with both sides presenting their arguments.