TUC analysis says 2023 bank surcharge cut cost UK £6bn in lost revenue

Chancellor urged to raise levy at October budget to make banks pay fair share

A Trades Union Congress analysis has concluded that the previous Conservative government’s 2023 reduction of the bank surcharge has deprived HM Treasury of £6bn in revenue over three financial years, informing the political contest over how the Labour government should fund its cost-of-living agenda.

The bank surcharge — an additional levy on lenders’ profits — was cut from 8% to 3% in 2023 under then-chancellor Rishi Sunak. The reduction was intended to offset a parallel rise in corporation tax from 19% to 25%, after the industry argued that higher headline rates would put UK-based lenders at a competitive disadvantage against financial centres such as New York.

According to the TUC, the move came just as lenders were reaping what the union body described as “handsome” earnings from rising interest rates. The UK finance ministry’s own corporate tax receipts, the TUC said, show the public purse missed out on £2.3bn in 2023-24, a further £1.7bn in 2024-25, and £2bn in 2025-26, totalling £6bn over the three-year period.

Paul Nowak, the TUC’s general secretary, called for the cut to be reversed and the surcharge increased beyond its pre-2023 level at the budget on 28 October. “The Tories’ tax break for banks has cost the UK public purse £6bn and counting. It’s time to end it and to make sure banks pay their fair share,” Nowak said.

He added: “At a time when families are struggling with soaring energy costs, taxing banks’ booming profits to cut bills is just plain common sense. There is a mountain of evidence to suggest that banks can afford to pay more tax – not least the record £25bn bonus pool they paid out last year.”

“This month’s budget is an opportunity to put things right,” Nowak said.

The TUC, which represents unions with more than 5.3 million members across England and Wales, said the UK’s four largest lenders — HSBC, NatWest, Barclays, and Lloyds Banking Group — have now generated £200bn in pre-tax profits over the past five years.

The union body set out three scenarios for the 28 October budget. Raising the surcharge to 16%, double the rate before the 2023 cuts, could yield £24bn over the next four years, the TUC estimated. A 35% surcharge, matching the windfall tax rate that the Conservatives imposed on energy companies, could deliver £60bn over the same period. Even restoring the surcharge to its previous 8% level would raise £9bn over four years, the TUC said.

A spokesperson for the campaign group Positive Money, which has also pressed for higher bank taxes at the budget, echoed the union’s call. “Reversing the last government’s tax cuts is the very least this government can do to claw back some of the lost billions it’s handed to banks in recent years,” the spokesperson said. “Banks are making record profits without lifting a finger, thanks to the higher rates being paid to them, by both customers and the Bank of England.”

The industry’s response came from David Postings, the chief executive of banking lobby group UK Finance, who said that a strong banking sector was essential for a strong UK economy and that profitable lenders would be able to invest in better services for customers, issue more loans, and deliver “returns” – such as shareholder dividends – that supported people’s savings and pensions.

“Banks also make a major contribution to the public finances and already face a materially higher total tax rate in the UK than in other leading financial centres,” Postings said.

He said further increases would damage growth. “Further tax increases would weaken the UK’s competitiveness, discourage investment and job creation, and work against the government’s ambition to deliver growth in every postcode,” Postings said.

The Guardian reported that bank bosses have lobbied intensively against tax rises after narrowly escaping higher levies at last year’s budget. Jamie Dimon, chief executive of the largest US bank, JP Morgan, met Burnham and Healey last month and warned that further levies could put investment and jobs at risk, the newspaper said. Dimon had earlier this year said he could scrap plans for a new £3bn London headquarters if the UK government became hostile to banks.

The Treasury was contacted for comment.