The UK public purse has been deprived of £6bn due to tax cuts for big banks, according to a new analysis by the Trades Union Congress (TUC). The TUC, which represents over 5.3 million union members, is calling on the chancellor to increase taxes on lenders and ensure they pay their "fair share" in the upcoming budget.
The £6bn Tax Break for Banks
The tax cuts in question were introduced under former Tory chancellor Rishi Sunak in 2023. The government slashed the bank surcharge – an additional levy on lenders' profits – from 8% to 3%. This move was intended to offset a rise in corporation tax from 19% to 25%, after the banking industry argued that higher taxes would put them at a competitive disadvantage compared with other global financial centres like New York.
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However, the cuts coincided with a period of rising interest rates, which led to handsome earnings for lenders. The UK's four largest banks – HSBC, NatWest, Barclays, and Lloyds Banking Group – have generated £200bn in pre-tax profits over the past five years. The TUC's analysis of HMRC corporate tax receipts shows that the UK public lost out £2.3bn in 2023-24, a further £1.7bn in 2024-25, and £2bn in 2025-26 – totalling £6bn over three years.
Impact on Public Finances
The lost revenue comes at a time when public services are under immense pressure. The TUC argues that the £6bn could have been used to fund essential services such as healthcare, education, and social care. Instead, it has effectively been transferred to bank profits, exacerbating inequality.
"With banks pocketing record profits, it's time they paid their fair share," said a TUC spokesperson. "The chancellor must reverse these tax cuts and ensure that the banking sector contributes adequately to the public purse."
Comparison of Bank Tax Rates
| Year | Bank Surcharge Rate | Corporation Tax Rate | Estimated Revenue Loss |
|---|---|---|---|
| 2022 | 8% | 19% | N/A |
| 2023-24 | 3% | 25% | £2.3bn |
| 2024-25 | 3% | 25% | £1.7bn |
| 2025-26 | 3% | 25% | £2bn |
Key Takeaways
- The TUC estimates that tax cuts for banks have cost the UK £6bn over three years.
- The bank surcharge was reduced from 8% to 3% in 2023, offsetting a rise in corporation tax.
- UK banks have made £200bn in pre-tax profits over the past five years.
- The TUC is urging the chancellor to increase taxes on banks to fund public services.
FAQ
What is the bank surcharge?
The bank surcharge is an additional tax on the profits of banking companies, on top of the standard corporation tax. It was introduced in 2016 to ensure that banks contribute fairly to public finances.
Why did the government cut the bank surcharge?
The government cut the surcharge to offset the increase in corporation tax from 19% to 25%, aiming to keep UK banks competitive internationally.
How much have banks profited in recent years?
The UK's four largest banks have collectively generated £200bn in pre-tax profits over the past five years, benefiting from rising interest rates.
As the budget approaches, the pressure is on the chancellor to address these concerns. The TUC's findings add to the growing debate over tax fairness and the role of the financial sector in supporting public services. With banks enjoying record profits, the call for a fairer tax system is likely to intensify.
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