Lloyds Finance Chief Hopes Bank Tax Rise Is Temporary

A senior Lloyds Banking Group executive has criticised the chancellor for linking a bank tax increase to energy bill support for households. Chief financial officer William Chalmers also warned the government against extending the higher levy beyond March 2028.

Chalmers spoke to journalists on an earnings call on Thursday morning. His comments came less than 24 hours after chancellor John Healey announced plans to double the bank surcharge, which is levied on top of corporation tax, to 6% from January. Healey called the rise "time-limited", lasting 15 months, in order "to pay for immediate support on energy bills".

Chalmers acknowledged that the economic environment was "challenging". He said the government should not ease pressure on households at the expense of banks, which provide loans that could fuel UK growth. "We therefore very much hope that yesterday's tax increase is indeed a temporary measure, to help ensure the business environment remains consistent with supporting long-term investment," he said.

He questioned the link between the two. "I don't see an obvious linkage between energy prices and bank taxes," Chalmers said. "In fact, if anything, it makes it even more important that we're able to lend into the real economy and secure growth, which is the best defence against energy price impacts that might otherwise be there on the UK economy."

Fears of an extension

The Treasury has promised to legislate for the 15-month limit. Senior bankers and industry lobbyists have privately questioned whether another energy crisis could undo that limit. Some pointed to Spain, where a two-year windfall tax on banks, meant to ease cost-of-living pressures in 2022, was extended by a further three years. It was also raised from 4.8% to 7% for the country's largest banks.

Chalmers said Lloyds is a major taxpayer. It has paid around £1.8bn of corporate taxes so far this year. "It is important to us that we have a stable and a predictable tax regime," he said.

Lloyds also reported on Thursday that third-quarter pre-tax profit almost doubled from a year earlier, from £1.2bn to £2.3bn. Most of that increase reflects an £800m hit last year, when the bank set aside another £800m for compensation linked to the motor finance scandal.

Net interest income rose 10%. That measure is the gap between what the bank charges borrowers and what it pays savers. It has risen across the banking industry as higher fuel prices, driven by the war in the Middle East, pushed up inflation expectations and interest rates.

Source: The Guardian