Campaigners Urge Windfall Tax on UK Banks Amidst Record Profits

Campaigners have renewed calls for a windfall tax on UK banks that could raise £19bn towards Andy Burnham’s cost of living agenda, after HSBC raked in $10.1bn (£7.5bn) worth of profits in the second quarter of the year.

Bosses at HSBC reported on Tuesday that profits rose 60% year on year in the three months to the end of June, helped by fees from wealth management and insurance business, as well as higher interest rates, which allow the bank to charge more for loans and mortgages.

The HSBC chief executive, Georges Elhedery, said he would consider increasing banker bonuses on the back of the strong results and planned to restart a share buy-back programme that had been on pause since last year.

It brings collective profits for the four largest banks – HSBC, NatWest, Barclays and Lloyds – to £29.2bn over the first six months of the year, putting lenders back in the crosshairs of campaigners, including Positive Money and the Trades Union Congress, who are calling for a fresh tax on the lucrative industry.

The campaign group Positive Money said bank bosses had pledged nearly half of their profits – a total of £13.7bn – to shareholders through dividends and share buy-backs, proving they could easily shoulder a tax that they calculated could ultimately raise £19bn towards the government’s spending plans at the October budget.

Positive Money said the government could replicate Spain’s levy, targeting any UK revenues above £800m with a 38% tax, in line with the energy profits levy introduced for oil and gas companies announced by the Tory government in 2022.

They said the resulting £19bn would be enough to cover the cost of Andy Burnham’s VAT cut from electricity bills (worth £850m), the £2 cap on bus fares (worth £500m) and the business rates cut for pubs, clubs and music venues (worth £100m) more than 13 times over.

“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,” said the co-director of Positive Money, Sara Hall.

“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.”

Banking bosses have been cautious when asked about their views on a fresh tax rise. They told journalists over the past week that they were encouraged by Burnham’s economic vision, but stressed that their ability to lend money to businesses was crucial for the new prime minister’s growth ambitions. “UK growth requires strong banks,” Elhedery said.

But advocates of a tax remain undeterred, and the 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.”

Joanne O’Neill, the co-director of advocacy and influencing at ActionAid UK, said the government should also take “meaningful action” to hold UK banks to account for their impact on the climate and human rights.