Labour backs away from bank windfall tax in bid to win over City
Labour is not looking at imposing a windfall tax on bank profits if it wins the general election on 4 July, according to reports, amid efforts to win over Canada.
The party has no plans to raise the surcharge on bank profits or introduce a financial transaction tax, Bloomberg News reported.
A spokesman for shadow chancellor Rachel Reeves also confirmed she had “no plans” for further taxes on banks. In a speech on Tuesday, Reeves seemingly ruled out tax rises beyond those Labour has already proposed.
The news comes as Labour seeks to win support from the City ahead of the general election amid fears it is more likely than the Conservatives to raid banks’ coffers instead of raising personal taxes or taxes on other businesses.
Influential lobby groups like the TheCityUK have staunchly opposed a windfall tax, arguing it would make Britain less competitive compared to other financial hubs by deterring businesses and investors.
The UK’s biggest banks generated bumper profits last year on the back of interest rate hikes from the Bank of England, which allowed them to charge more on loans.
The Big Four banks—Lloyds, HSBC, Barclays, and Natwest—together posted around £44.2bn in pretax profit last year, up 41 per cent from £31.4bn in 2022.
Meanwhile, data published by the Treasury Committee earlier this month showed big banks earned more than £9bn in interest on their Bank of England reserves last year, up 135 per cent from 2022.
Non-profit advocacy group Positive Money found in February that a windfall tax on Big Four bank profits could raise between £3.5bn and £14bn.
Bloomberg analyst Tomasz Noetzel estimated a figure of between £2bn and £3bn, assuming total levies paid by the sector could triple to as much as £4.2bn.
Then-Chancellor Rishi Sunak cut the tax surcharge on the banking sector to three per cent from eight percent last April to offset a hike in corporation tax, which banks pay on top of the surcharge.
Labour’s efforts to win over the City received a boost on Monday when it published a letter of support from 120 business leaders saying the economy has been “beset by instability, stagnation and a lack of long-term focus” and that the election represents “the chance to change the country”.
Elsewhere, Sky News reported on Tuesday that none of the 15 companies that sit on Sunak’s business council would publicly endorse the Tories.