TELL HUNT TO TAX THE BANKS
Chancellor Jeremy Hunt
We're calling on Chancellor Jeremy Hunt to bring in a windfall tax on banks' excessive profits, similar to the windfall tax on energy companies.
While most of us are suffering with the rising cost of living and public services at breaking point, banks are making huge profits from the Bank of England’s decision to raise the base interest rate. This choice has forced households, small businesses and the Bank of England itself to hand billions to banks for doing absolutely nothing.
If the government really wants to ‘level up’, Chancellor Jeremy Hunt should bring in a windfall tax on banks’ unmerited profits, and help fund our vital public services properly instead. Increasing the bank surcharge from 3% to 35% would raise around £67bn between 2022 and 2028, based on OBR forecasts.
Background information:
This week Barclays announced profits of £7 billion for 2022, and NatWest announced profits of £5.1 billion for the same period. Both have massively increased their bonus pool for bankers. [1]
The big five FTSE 100 banks – Barclays, HSBC, Lloyds, NatWest and Standard Chartered – could post cumulative pre-tax profits of £37.4bn as they reveal their earnings for 2022, according to analysts at investment platform AJ Bell.
Banks are also set to receive tens of billions of pounds of public money in the next few years because of how the Bank of England remunerates central bank reserves at its base rate, which is currently rising. The OBR’s latest forecasts suggest that around £150bn of interest on reserves will be paid to banks in the next six years. [2]
The windfall from reserve remuneration comes in addition to the gains banks are set to receive from higher interest rates more generally, which boosts banks’ profitability.
The scale of this transfer from the public to banks is especially difficult to justify at a time when workers are set to pay significantly more tax, and public services are facing even more cuts. The Chancellor instead opted to cut the surcharge banks pay by 60% (from 8% to 3%) in the Autumn Statement.
Instead, the government should introduce a windfall tax to recapture excess profits banks derive from reserve remuneration.
Former Bank of England deputy governor Sir Charlie Bean recently proposed taxing windfalls banks receive from reserve remuneration, suggesting that it could raise tens of billions of pounds. [3]
In line with the government’s approach towards taxing oil and gas companies a 35% Energy Profits Levy for windfall profits arising from the energy crisis, it would also be appropriate to tax banks on the windfalls received simply for holding reserves.
Increasing the bank surcharge from 3% to 35% would raise around £67bn between 2022-3 and 2027-8 (over £11bn a year on average), based off OBR forecasts.
NOTES
[1] Natwest 2022 Profits - Positive Money response: https://positivemoney.org/2023/02/natwest-2022-profits-positive-money-response/
Barclays 2022 Profits - Positive Money response: https://positivemoney.org/2023/02/barclays-2022-profits-positive-money-response/
[2] https://obr.uk/efo/economic-and-fiscal-outlook-november-2022/
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To:
Chancellor Jeremy Hunt
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[Your Name]
Similar to the windfall tax on energy companies, we are calling on Chancellor Jeremy Hunt to bring in a windfall tax on banks’ unearned excess profits.
While most of us are suffering with the rising cost of living and underfunded public services, banks are making huge profits from the Bank of England’s decision to raise the base interest rate. This choice has forced households, small businesses and the Bank of England itself to hand billions to banks for doing absolutely nothing.
If the government really wants to ‘level up’, Chancellor Jeremy Hunt should bring in a windfall tax on banks’ unmerited profits, and hand this money back to the people it’s been stripped from. Increasing the bank surcharge from 3% to 35% would raise around £67bn between 2022 and 2028, based on OBR forecasts.
Background information:
The big five FTSE 100 banks – Barclays, HSBC, Lloyds, NatWest and Standard Chartered – could post cumulative pre-tax profits of £37.4bn as they reveal their earnings for 2022, according to analysts at investment platform AJ Bell.
Banks are also set to receive tens of billions of pounds of public money in the next few years because of how the Bank of England remunerates central bank reserves at its base rate, which is currently rising. The OBR’s latest forecasts suggest that around £150bn of interest on reserves will be paid to banks in the next six years. [1]
The windfall from reserve remuneration comes in addition to the gains banks are set to receive from higher interest rates more generally, which boosts banks’ profitability.
The scale of this transfer from the public to banks is especially difficult to justify at a time when workers are set to pay significantly more tax, and public services are facing even more cuts. The Chancellor instead opted to cut the surcharge banks pay by 60% (from 8% to 3%) in the Autumn Statement.
Instead, the government should introduce a windfall tax to recapture excess profits banks derive from reserve remuneration.
Former Bank of England deputy governor Sir Charlie Bean recently proposed taxing windfalls banks receive from reserve remuneration, suggesting that it could raise tens of billions of pounds. [2]
In line with the government’s approach towards taxing oil and gas companies a 35% Energy Profits Levy for windfall profits arising from the energy crisis, it would also be appropriate to tax banks on the windfalls received simply for holding reserves.
Increasing the bank surcharge from 3% to 35% would raise around £67bn between 2022-3 and 2027-8 (over £11bn a year on average), based off OBR forecasts.
NOTES
[1] Natwest 2022 Profits - Positive Money response: https://positivemoney.org/2023/02/natwest-2022-profits-positive-money-response/
Barclays 2022 Profits - Positive Money response: https://positivemoney.org/2023/02/barclays-2022-profits-positive-money-response/
[2] https://obr.uk/efo/economic-and-fiscal-outlook-november-2022/
[3] https://www.bloomberg.com/news/articles/2022-11-01/uk-should-impose-windfall-tax-on-banks-former-boe-chief-says?leadSource=uverify%20wall