Why the government won’t tax the banks on their windfall profits


Members of the public are holding an action outside the Bank of England tomorrow (Thursday) at 8.45am – as the Bank releases its Monetary Policy Report.

They want to protest against the relentless hiking of interest rates, which are hurting households but benefiting the big banks. 

They will demand that the Bank of England stops trying to respond to inflation with policies that make the cost of living crisis worse. They also want the government to introduce a windfall tax on the unearned profits banks are making from interest rate rises. 

Last week, at least four of the biggest UK banks announced major rises in pre-tax profits for the first half of 2023.

It began with announcements from Lloyds Bank and Santander that their pre-tax profits had risen by 23 and 13 per cent respectively at the end of the second quarter (Q2) of 2023.

Both Lloyds and Santander’s  results were a slap in the face of the public, who are footing the bill for their bumper profits.

The context changes, but if the past 15 years have taught us anything, it’s that the same players always come out on top. Leaving banks to bask in bonuses and buybacks unchecked sends one message: the City always wins.

Support is growing for a windfall tax on these unearned profits: we’ve heard politicians from the backbenches – including Angela Eagle, John McDonnell, Clive Lewis, Diane Abbott and Richard Burgon – throw their weight behind the idea. Now we need those from within government to do the same.

Next up was Barclays announcement a day later that its pre-tax profits for the first half of 2023 were £4.6 billion, compared to £3.7 billion for the same period last year.

It shouldn’t surprise anyone that Europe’s biggest funder of fossil fuels is profiting from its customers’ hardship: the well-being of humanity clearly isn’t high on their agenda. 

What should surprise people is the staggering lack of action being taken by government and regulators to bring them to heel.

With these windfall profits coming from the public, it’s time for the government to tax that money back, and use it to support the households struggling to keep their heads above water.

On Friday, came NatWest’s announcement that its pre-tax profits for the first half of 2023 were £3.59 billion, up from £2.62 billion for the same period last year.

What a blow to taxpayers that the year NatWest returns to profit is the same year the government sold our majority stake in the bank for a huge loss on what we paid for it.

And these aren’t profits made from any great initiative of the bank’s, but from the suffering of the public; the same public that bailed them out fifteen years ago.

We can’t rely on private banks to pass higher interest rates on to savers, but we should be able to rely on our government to tax the unearned profits banks are making from them, and return those funds to the public services we all depend on. 

Finally, earlier this week we had the HSBC results – £16.9 billion in the first six months of the year. Make no mistake: the growth in HSBC’s profits is a direct result of the higher interest rates its suffering customers are struggling to pay on their loans.

If the government wants to restore trust in its abilities to rule in the public’s best interests, it should take a leaf out of Thatcher’s book and tax the unearned profits that banks are making off the backs of workers.

Added to which, higher interest rates mean that the Bank of England is expected to pay an estimated £75bn of interest on banks’ risk free reserves over 2023 and 2024, with a total of around £150bn due to be paid out between 2022 and 2028.  

We want this windfall to be taxed. Sign our petition if you agree!

Unfortunately, we calculate using official data that private financial firms and their representatives – including lobbying groups and those employed by financial firms – made up half or more of attendees in 38.3 per cent of meetings declared by Treasury ministers last year. When it comes to the less-scrutinised diaries of the Treasury’s civil servants, representatives of the financial sector occupied almost two-thirds (61.5%) of meetings with them in 2022.

It’s hardly surprising that the Chancellor continues to resist calls from MPs and the public to place a windfall tax on unearned bank profits, when he’s clearly receiving the opposite message from behind closed doors.

Access to the gatekeepers of public funds shouldn’t be so dominated by just one sector. Members of the public don’t get this kind of access, and neither do the organisations representing them. Because of the power of corporate lobbying, faith in our democracy is hitting rock bottom. To restore it, we need caps on the donations political parties and MPs can receive, to prevent those with the deepest pockets buying access to lawmakers.

If you want to join our demonstration, you would be very welcome. We will gather outside the Royal Exchange, London EC3V 3LR, opposite the main entrance of the Bank of England, at 8.45am, on Thursday  (August 3).

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Radix is the radical centre think tank. We welcome all contributions which promote system change, challenge established notions and re-imagine our societies. The views expressed here are those of the individual contributor and not necessarily shared by Radix.

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