Pressure is mounting on Prime Minister Andy Burnham to impose a new windfall tax on major banks after a £29 billion profit surge. HSBC reported a 23% jump in half-year profits to £14.5 billion, intensifying calls from unions and campaign groups for the government to target lenders in the upcoming autumn Budget.
Record Profits for Big Four
HSBC's results follow strong performances from Lloyds Banking Group, Barclays, and NatWest, all boosted by higher-for-longer interest rates. Together, the 'big four' banks have generated over £29 billion in just six months, with combined annual profits projected to reach £55.3 billion—equivalent to roughly £1,750 every second.
The profit surge is partly attributed to higher inflation stemming from the Middle East conflict and energy shocks, which have kept interest rates elevated. This has widened the gap between what banks pay savers and what they earn from lending, inflating their net interest income.
Calls for Windfall Tax
The TUC has urged the government to use a windfall tax on banks to fund a social tariff that could cut energy bills by up to £559 a year for low- and middle-income households. TUC General Secretary Paul Nowak said: “There is now a mountain of evidence to suggest that banks can easily afford to pay more tax. While higher interest rates have meant mortgage misery and bigger bills for the rest of us, the big banks have been rolling in it.”
Nowak added: “Andy Burnham has rightly prioritised cost of living measures in his first days as prime minister, but as the war in Iran rumbles on energy prices will rise further - and the government will need to do more to protect households. That’s why it’s time to increase the tax on bank profits to cut bills. It’s common sense and it’s the right thing to do.”
Potential Revenue
The TUC proposes increasing the 3% surcharge on bank profits—currently paid on top of 25% corporation tax—to 8%, which could raise £9 billion over four years. Doubling it to 16% would yield an estimated £24 billion, while a 35% surcharge, matching the windfall tax on energy companies, could deliver £60 billion.
Campaign group Positive Money claims a windfall tax could raise £19 billion from the big four alone if announced in the autumn Budget. This would cover the cost of Mr Burnham’s VAT cut on electricity bills, the £2 cap on bus fares, and the business rates cut for pubs, clubs, and music venues more than 13 times over.
Sara Hall, co-executive director at Positive Money, said: “Interest rate rises have landed us in a lose-lose situation: not only have they proven ineffective at taming inflation coming from overseas pressures, they’ve also handed windfall profits to banks, directly at the public’s expense.”
She added: “Previous governments have allowed the powerful banking lobby to persuade them against taxing these record-breaking profits in recent years, despite overwhelming public support for the policy. We’re calling on Andy Burnham to break with his predecessors by resisting the demands of City lobbyists and reclaiming these lost billions with a windfall tax on bank profits, the proceeds of which could be used to fund truly life-changing support for the households and businesses struggling to pay their bills right now.”
HSBC Defends Performance
HSBC’s results showed profits rose by £2.75 billion to £14.5 billion, with net interest income climbing to £13.5 billion. HSBC boss Georges Elhedery said: “HSBC is becoming the stronger bank we set out to build. We are executing our strategic priorities with pace, precision and discipline. This is allowing our four businesses to focus on their core strengths, grow, work together more effectively and deepen customer relationships. The result is a bank capable of achieving more.”
