Chancellor Faces Backlash Over Bank Windfall Tax Decision
Chancellor Rachel Reeves is under intense fire for failing to implement a windfall tax on the UK's largest banks, which could have generated a substantial £12.5 billion in revenue. This decision has sparked outrage among campaigners who claim it has forced the government to rely on stealth taxes that disproportionately impact ordinary workers.
Analysis Reveals Missed Revenue Opportunity
New analysis from the research and campaign group Positive Money indicates that a targeted levy on the windfall profits of HSBC, Barclays, NatWest, and Lloyds could have raised £12.5 billion. This figure significantly exceeds the expected revenue from the government's alternative plan to freeze personal tax thresholds for an additional three years.
The four major banks reported collective pre-tax profits of £45.7 billion for 2025, largely driven by sustained high interest rates. These record earnings come at a time when many British families continue to grapple with the persistent cost of living crisis, highlighting a stark contrast between corporate success and household financial strain.
Proposed Tax Model and Government Alternatives
Positive Money suggested implementing a 38% levy on retail net income above £800 million, mirroring the existing tax structure applied to oil and gas giants. Had this measure been adopted in the Autumn Budget, it could have provided a crucial financial boost to the Treasury, alleviating pressure on public finances.
Instead, the government opted to extend the freeze on National Insurance and income tax thresholds until 2031. This stealth tax strategy is predicted to drag more minimum wage workers into paying basic rate tax, even those working part-time, further tightening the financial squeeze on low-income households.
Executive Bonuses and Market Reactions
The absence of a windfall tax coincided with announcements of substantial pay packages and bonuses for top banking executives. Notably, NatWest's chief executive received a £6.6 million package, marking the highest payout for a boss at the firm since 2006.
Campaigners argue that banking share prices rose following the budget as a direct result of the Chancellor's decision not to intervene. They contend that these financial rewards stem from successful industry lobbying against fairer taxation measures, prioritizing corporate interests over public welfare.
Public Support and Calls for Action
Public backing for a bank tax remains robust, with over 65,000 people signing a petition alongside support from major unions and thinktanks. Despite this widespread pressure, the Treasury continues to bear the cost of interest payments made by the Bank of England to commercial lenders, adding to the fiscal burden.
Sara Hall of Positive Money has urged Chancellor Reeves to distance herself from bank lobbyists and reclaim these unearned billions. She insists that prioritizing corporate windfalls over the financial stability of ordinary people is a choice that must be urgently reversed to ensure equitable economic policy.
