Full Breakdown
Bank Tax Cuts Reduce UK Treasury Revenue by £6 billion
By Drooid · · How we work
2023 Surcharge Reduction and Its Rationale
In 2023 the Conservative chancellor Rishi Sunak lowered the bank surcharge from 8 % to 3 % to offset a rise in corporation tax from 19 % to 25 %. The Treasury argued the move would keep UK banks competitive with financial centres such as New York. The reduction was enacted just as lenders began posting strong earnings after interest-rate hikes.
Financial Impact and Projected Revenues
The Trades Union Congress (TUC) calculates that the surcharge cut has cost the public purse £2.3 bn in 2023-24, £1.7 bn in 2024-25 and £2 bn in 2025-26 – a total loss of £6 bn over three years. The TUC’s analysis also notes that the UK’s four largest lenders – HSBC, NatWest, Barclays and Lloyds Banking Group – have generated £200 bn in pre-tax profits over the past five years.
If the surcharge were raised to 16 % (double the pre-cut rate), the TUC estimates £24 bn could be raised over four years. A 35 % surcharge, matching the windfall tax applied to energy firms, would deliver £60 bn, while restoring the surcharge to its 8 % pre-2023 level would raise £9 bn in the same period.
Official Reactions
Jamie Dimon, chief executive of JPMorgan, warned Prime Minister Andy Burnham and Chancellor John Healey that further levies could jeopardise a planned £3 bn London headquarters if the government became “hostile to banks.”
David Postings, chief executive of banking lobby group UK Finance, contends that “banks are making record profits without lifting a finger, thanks to the higher rates being paid to them, by both customers and the Bank of England.”
Verbatim Quote
- “Banks are making record profits without lifting a finger, thanks to the higher rates being paid to them, by both customers and the Bank of England.” — David Postings, chief executive of UK Finance