Tory tax breaks for banks cost UK public purse £6bn, TUC claims ahead of budget
According to the Trades Union Congress (TUC), tax cuts implemented for major banks under former chancellor Jeremy Hunt in 2023 have deprived the UK public purse of six billion pounds in lost revenues. The TUC is urging Chancellor John Healey to reverse these cuts and increase the bank surcharge during the upcoming budget on October twenty-eighth. While campaign groups support the move to help offset rising living costs, banking lobby representatives warn that further tax increases would weaken the UK's competitiveness and hinder investment.
Key points
- The TUC calculates that UK tax cuts for banks introduced in 2023 cost the public purse £6bn over three years.
- Campaigners are calling on Chancellor John Healey to increase the bank surcharge in the October 28 budget.
- The TUC suggests raising the surcharge to 16% or 35% could raise between £24bn and £60bn.
- Banking lobby group UK Finance warns that higher taxes would damage the UK's competitiveness and discourage investment.
What Happened
The Trades Union Congress (TUC) reported that tax cuts introduced for big banks in 2023 have cost the UK public purse six billion pounds in lost revenues. The union body calculated that the public lost £2.3bn in 2023-24, £1.7bn in 2024-25, and £2bn in 2025-26 following the previous government's decision to slash the bank surcharge from 8% to 3%.
As a result, the TUC has urged Chancellor John Healey to increase taxes on lenders during the upcoming budget on October 28 to help fund measures tackling the cost of living under Prime Minister Andy Burnham's administration.
Who Said What
Paul Nowak, general secretary of the TUC, stated that the tax break has cost the public billions and that taxing banks' booming profits to cut household bills is common sense. He noted that banks paid out a record £25bn bonus pool last year.
David Postings, chief executive of banking lobby group UK Finance, defended the sector, arguing that profitable lenders are essential for a strong economy, supporting savings, pensions, and customer investment. He warned that further tax increases would discourage investment and job creation.
Jamie Dimon, chief executive of JP Morgan, also warned officials against further levies during a recent meeting, cautioning that it could put investment and jobs at risk.
Context
The 2023 surcharge reduction was originally implemented to offset a rise in corporation tax from 19% to 25% after lenders argued higher rates placed them at a disadvantage compared to international financial hubs like New York. However, the four largest UK lenders—HSBC, NatWest, Barclays, and Lloyds Banking Group—have generated £200bn in pre-tax profits over the past five years.
What Happens Next
The debate over bank taxation centers on the upcoming October 28 budget, where campaigners and union bodies are pressing the government to reverse previous cuts and potentially raise the bank surcharge to 16% or even 35% to generate billions in public revenue.
Why it matters
The debate over bank taxation highlights the ongoing tension between generating public revenue to support households facing rising energy bills and maintaining the international competitiveness of the UK's financial sector.