Tax cuts for big banks introduced by the previous Conservative government have deprived the UK public purse of £6bn in revenues, according to calculations by the Trades Union Congress (TUC), which is now calling on the government to increase lender levies in the upcoming budget. The findings show that public finances suffered losses of £2.3bn in the 2023–24 financial year, £1.7bn in 2024–25, and an estimated £2bn in 2025–26.
The 2023 Bank Surcharge Cuts and £6bn Public Revenue Loss
The shortfall stems from a policy shift enacted under former chancellor Jeremy Hunt. In 2023, the government slashed the bank surcharge—an additional levy placed on lenders’ profits—from 8% to 3%. Officials implemented the cut to offset a concurrent rise in corporation tax from 19% to 25%. Financial lobbyists had argued that higher overall taxes would place UK institutions at a competitive disadvantage against rival financial centres like New York.
These reductions coincided with a period of surging revenues for major lenders driven by rising interest rates. The UK’s four largest institutions—HSBC, NatWest, Barclays, and Lloyds Banking Group—generated a combined £200bn in pre-tax profits over the preceding five-year period. The TUC derived its £6bn figure from an analysis of HM Revenue and Customs (HMRC) corporate tax receipts.
Tuc urges chancellor john healey to raise bank surcharge
With lenders continuing to record high earnings, the TUC has urged chancellor John Healey to raise the bank surcharge beyond its pre-2023 level during the autumn budget scheduled for 28 October. Union leaders argue that higher levies could generate substantial revenue to help households manage rising living costs under prime minister Andy Burnham’s administration.
Paul Nowak, the TUC’s general secretary, stated that the tax break amounted to £6bn and counting, describing increased taxation on banking profits as common sense given soaring energy bills for families. Nowak noted that the sector distributed a record £25bn bonus pool over the previous year.
The TUC outlined three potential tax adjustments for the upcoming fiscal package:
- Reversing the cuts to restore the surcharge to its previous 8% level would raise £9bn over four years.
- Doubling the pre-2023 rate to a 16% surcharge would generate £24bn over four years.
- Applying a 35% surcharge, matching the windfall tax rate previously imposed on energy companies, would deliver £60bn over four years.
Campaign group Positive Money supported the union’s stance. A spokesperson for the group stated that lenders had accumulated record profits without active intervention, benefiting directly from higher interest rates paid by retail customers and the Bank of England.
Banking executives warn higher levies damage wider economy
Banking executives and industry representatives have pushed back against proposals for increased taxation, warning that higher levies could damage the wider economy. David Postings, chief executive of banking lobby group UK Finance, argued that a profitable banking sector remains essential for economic growth, enabling firms to invest in customer services, issue more loans, and support savings and pensions through shareholder dividends.
Postings added that UK lenders already face a materially higher total tax rate than counterparts in other leading financial jurisdictions. He cautioned that additional tax increases would weaken national competitiveness, deter job creation, and obstruct government growth targets.
International banking leaders have also intervened directly in the debate. Jamie Dimon, chief executive of JP Morgan, met with Burnham and Healey to warn against further levies, suggesting that increased taxation could put local investments and jobs at risk. Earlier in the year, Dimon indicated he could reconsider plans for a new £3bn London headquarters if government policy toward the sector became hostile.
Frequently Asked Questions About Bank Taxation and the UK Budget
What caused the £6bn loss in public revenue from banks?
The revenue loss stems from a 2023 decision by the Conservative government to reduce the bank surcharge from 8% to 3%, offsetting an increase in corporation tax from 19% to 25%.
How much profit have the largest UK banks made recently?
The UK’s four largest lenders—HSBC, NatWest, Barclays, and Lloyds Banking Group—generated £200bn in pre-tax profits over the past five years.
What specific rate increases are unions proposing for the October budget?
The TUC has suggested raising the surcharge to 16% to generate £24bn over four years, or implementing a 35% windfall-style tax rate to raise £60bn over the same period.
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