Shares in UK banks have fallen sharply on the again of a report which urges the chancellor to position their earnings in her sights within the coming price range.
As Rachel Reeves stares down a rising deficit – estimated at between £20bn-£40bn heading into the autumn – the Institute for Public Coverage Analysis (IPPR) stated there was a possibility for a windfall by closing a loophole.
It beneficial a brand new levy on the curiosity UK lenders obtain from the Financial institution of England, amounting to £22bn a yr, on reserves held on account of the Financial institution’s historic quantitative easing, or bond-buying, programme.
Cash newest: Ryanair modifications cabin bag sizing
It was first launched on the top of the monetary disaster, in 2009.
The left-leaning think-tank stated the cash obtained by banks amounted to a subsidy and recommended £8bn may very well be taken from them yearly to pay for public companies.
It argued that the loss-making scheme – a consequence of rising rates of interest since 2021 – had left taxpayers footing the invoice unfairly, because the Treasury has to cowl any loss.
Please use Chrome browser for a extra accessible video participant
1:28
Why taxes may go up
The Financial institution not too long ago estimated the overall hit would quantity to £115bn over the course of its lifetime.
The publication of the report coincided with a narrative within the Monetary Occasions, which spoke of rising fears throughout the banking sector that it was firmly within the chancellor’s sights.
Her first price range, in late October final yr, put companies on the hook for the majority of its tax-raising measures.
Ms Reeves is beneath stress to search out extra money from someplace, as she has dominated out breaking her personal fiscal guidelines to assist safe the money she wants by way of heightened borrowing.
Please use Chrome browser for a extra accessible video participant
1:17
Is Labour plotting a ‘wealth tax’?
Different measures understood to be into consideration embrace a wealth tax, new property tax, and a shake-up that would result in a alternative for council tax.
Analysts at Exane instructed purchasers in a observe: “Within the final couple of years, the chancellor has been protecting of the banks and has prevented elevating taxes.
“However, public finances may require additional cash and pressures for a bank tax from within the Labour party seem to be rising,” it concluded.
Financial institution shares have loved a robust 2025 up to now.
However Friday’s investor flight noticed shares in Lloyds and NatWest plunge by greater than 5%. These for Barclays have been greater than 4% decrease at one stage.
A spokesperson for the Treasury stated the easiest way to strengthen public funds was to hurry up financial progress.
“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms,” they added.
