A top Lloyds Banking Group executive has criticised the chancellor for linking bank tax increases to energy bill support for UK households, as he warned the government against extending the higher levy beyond March 2028. Lloyds’ chief financial officer, William Chalmers, acknowledged that the economic environment was “challenging but said this should not come at the expense of the banking sector, as it provides loans that could fuel UK growth. The comments came less than 24 hours after the chancellor, John Healey, announced plans to double the bank surcharge, which is levied on top of corporation tax, from 3% to 6% from January.
Healey said the increase would be “time limited”, lasting 15 months in order “to pay for immediate support on energy bills”. However, Chalmers questioned the government’s decision to tie bank taxes to soaring energy costs, amid concerns that this could open the door to an extension or even further rise in the levy after the 15 months expire. Well, I don’t see an obvious linkage between energy prices and bank taxes.
Some pointed to Spain, where a two-year windfall tax on banks, meant to alleviate cost of living pressures in 2022, was ultimately extended a further three years, and increased from 4.8% to 7% for the country’s largest banks. However, that increase largely reflected the £800m hit it took last year after setting aside another £800m for compensation over the motor finance scandal. Its results were also supported by a 10% rise in net interest income, which measures the difference between what it charges borrowers versus what it pays to savers, showing the bank continued to benefit from higher interest rates.
Net interest income has risen across the banking industry, as inflation expectations – driven by higher fuel prices triggered by the war in the Middle East – pushed up interest rates.
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