Reinstate windfall tax on banks after surge in profits, TUC urges

The Trades Union Congress (TUC) has called for the reinstatement of a higher windfall tax on the UK’s largest banks following a surge in their profits. The four major lenders—Barclays, HSBC, Lloyds, and NatWest—reported combined first-quarter profits of nearly £14 billion, driven in part by the current high interest rate environment. The TUC argues that the bank surcharge, which was reduced from 8% to 3% in 2023, should be increased again to ensure banks contribute fairly during a period of economic strain for many households and businesses. The TUC estimates that restoring the surcharge to its previous 8% level could generate £9 billion in tax revenue over four years, while doubling it to 16% might raise £24 billion. This call comes amid rising mortgage rates, which have increased to an average two-year fixed rate of 5.77%, up from 4.83% before the Middle East conflict intensified. The Bank of England recently held interest rates at 3.75%, with markets anticipating further hikes, factors that have contributed to the banks’ profitability. Bank executives have defended the profit increases, citing the shift from a prolonged low-interest-rate environment to higher rates as a natural driver of improved margins. Lloyds Banking Group’s CFO, William Chalmers, emphasized that the sector expected gradual profitability growth as rates rose, dismissing claims of profiteering. Nonetheless, the TUC maintains that the extraordinary profits warrant a higher tax burden to help mitigate the economic fallout from global conflicts and domestic cost-of-living pressures. The TUC’s proposal highlights broader concerns about economic inequality and the role of financial institutions in supporting public finances. With the big four banks having made nearly £46 billion in profits last year, the union group argues that increased taxation on these institutions could provide critical funding to shield households and businesses from ongoing economic challenges. The debate over bank taxation underscores tensions between corporate profitability and social responsibility amid a volatile global economic landscape.