Campaigners are once again calling for the UK government to impose a windfall tax on its largest banks, following HSBC's £7.5 billion second-quarter profits. These figures have reignited the push for a levy that could generate £19 billion, funding elements of Prime Minister Andy Burnham’s cost-of-living agenda. HSBC reported a significant 60% year-on-year profit increase for the three months ending June, attributed to rising interest rates and robust performance in wealth management and insurance. The bank's CEO, Georges Elhedery, mentioned the potential for bonus increases for bankers and signaled a return to share buy-backs, a move that had been suspended for over a year.
The surge in bank profits has drawn attention from advocates and politicians, who argue that the financial sector is reaping the benefits of a struggling economy. HSBC’s latest figures show it was able to raise more from mortgages and loans due to higher interest rates. The high numbers have placed banks squarely in the sights of activist groups and unions, who demand a new levy on the sector.
Calls for Government Action on a New Tax
Proposed Windfall Tax Model
Positive Money, a campaign group, is urging the government to follow Spain’s model for a windfall tax. Under this proposal, banks with annual UK revenue exceeding £800 million would be taxed at a 38% rate. The estimated £19 billion in revenue from such a tax could be used to finance Burnham’s plans, including a VAT cut on electricity, a cap on bus fares, and business rate reductions for pubs and music venues. According to Positive Money’s Sara Hall, this money could be used to support households and businesses facing severe financial strain.
Positive Money’s research shows that the banks have already directed £13.7 billion to shareholders through dividends and share buy-backs. This highlights their capacity to pay more in taxes, according to the group. Hall emphasized that the public strongly supports the idea, but past governments have been swayed by the banking sector’s lobbying. She urged Burnham to take a different approach and impose the tax, breaking the pattern of inaction.
Banking Industry Response
Banking leaders have been hesitant to comment on the proposed tax. Although they’ve expressed optimism about Burnham’s economic vision, they’ve stressed that their role in lending is vital to achieving growth. Elhedery has publicly stated that "UK growth requires strong banks," but advocates for a levy remain steadfast in their demands. The TUC’s Paul Nowak pointed out that while many families and businesses struggle with rising costs, banks are profiting from the current environment. Collectively, the UK’s four largest lenders – HSBC, NatWest, Barclays and Lloyds – reported £29.2bn in profits over the first six months of the year, with almost half, £13.7bn, pledged to investors through dividends and share buybacks. Those bumper figures have turbocharged calls for a tax increase on banks. Campaigners say raising taxes on their earnings could yield £19bn from the big four banks alone, helping to offset the price of the prime minister Andy Burnham’s ambitious plans to slash living costs and overhaul the UK’s social care system. The NatWest chief executive, Paul Thwaite, said tax rises would hold back lending and harm the economy. As he reported a 29% profit increase, he said: "If you want strong economies, you want strong banks. It’s really important to have consistency and stability of policies." Barclays said its loans would be crucial to supporting Burnham’s growth agenda, suggesting any constraints on its finances could weigh on the funding available to business and consumers. "We think that the track record that we and the other banks have, in terms of supporting UK growth and indeed leaning into UK lending in the way we have … is really important for the health of the economy," the chief financial officer, Anna Cross, said last week. "We hope that that will be considered." The banks’ lobby machine will now be keen to prove that Burnham’s growth plans could be dead in the water without the City’s support. Some influential executives have already fired warning shots, saying crucial lending could be throttled and that lucrative investments – such as JP Morgan’s £3bn Canary Wharf HQ – could be on the line. "We paid probably $10bn (£7.4bn) in extra taxes by now, I don’t think that’s right or fair. If that happens too much, we will reconsider," the Wall Street bank’s chief executive, Jamie Dimon, said.
Environmental Concerns Raised
In addition to concerns about financial inequality, there are mounting environmental concerns. Joanne O’Neill of ActionAid UK highlighted HSBC’s role in funding fossil fuels and industrial agriculture between 2021 and 2023. She criticized the bank for weakening its climate commitments and avoiding accountability for the harm caused by its investments. O’Neill and ActionAid are advocating for a "polluters pay" tax that would ensure banks are held responsible for their environmental impact.
The push for a tax is gaining momentum, with groups like Positive Money and the TUC arguing that it would be both fair and necessary. The proposed £19 billion in tax revenue could be used to address some of the most pressing issues facing the UK’s households and small businesses. O’Neill insists that banks must pay their fair share, especially when their actions contribute directly to climate change and environmental degradation.