- Motion made, and Question proposed, That this House do now adjourn.—(Aaron Bell.)
- 7:25 pm
- Today I am calling on the Government to introduce a windfall tax on the banks, which have exploited the cost of living crisis to make super-profits, just as the energy companies did before them. Such a tax could create much-needed funds to invest in our public services and to help bail out those hit hard by the ongoing economic crisis. Before I make the case for that, however, I want to look at where we are after 13 years of Tory misrule.British economic growth was recently downgraded again. Britain has now seen well over a decade of economic stagnation. We are living through the largest fall in living standards since records began 75 years ago. This will be the first Parliament in history in which people are poorer at the end of it than at the beginning. What a record! Wages are set to be no higher in 2028 than they were 20 years before. That is the slowest wage growth in 200 years, and it has cost the average worker £10,700 a year in lost pay growth. Shockingly, 9 million younger workers have never worked in an economy where they have seen sustained average wage rises.Income inequality in the UK is higher than in any other large European country. We have a much weaker economy and much lower living standards. That is the record of the Government’s agenda of austerity, deep public service cuts and trickle-down economics. They have created a social nightmare, too. Fourteen million people live in poverty, including over 4 million children. One in seven people is facing hunger, and 6 million households are in fuel poverty. As the cost of living crisis continues to hit families across the UK, this should be a time to bail them out. It should be a time of public investment to boost economic growth and living standards, and to rescue our public services. Instead, the Government are plotting another £20 billion-worth of cuts to public spending. I cannot think of a single policy that would cause more economic and social harm.When we talk of a worsening economic and social crisis, we cannot forget the class politics of it all: how it affects the 99% and how it affects the 1%. We hear a lot about the cost of living crisis, but it is not a crisis for the elites. For them, it has been boom time. There have never been so many UK billionaires, and British billionaires have increased their wealth by £120 million every single day over the past decade. The profits of the UK’s largest companies are now 89% higher than before the pandemic. Bankers’ bonuses have hit record highs. Bosses’ pay at the largest 100 companies has been going up and up, and has increased by 16% in the past year.One sector that has been doing very well out of the crisis is banking. Just like the oil and gas companies, the banks have used the crisis to line their pockets. While millions of people struggle to pay their mortgages and rents, the banks have been cashing in. Higher interest rates have enabled them to charge households more for mortgages and firms more for loans, but those higher interest rates have not been passed on to savers.
- I commend the hon. Gentleman for bringing forward the debate; I spoke to him beforehand. Does he not agree that the closure of high-street banks—there have been some 11 in my constituency of Strangford— especially in rural communities, has left a massive problem of rural isolation and that there should be a windfall tax on the banks making profits, with that money routed to the rural communities who have felt the brunt of the banks’ thirst for enhanced profits over service, which seems to be their calling card?
- The hon. Member makes an important point. The example he gives of the closure of so many high-street banks, which disadvantages people in my community as well as in rural communities, just goes to show that the banks’ huge increase in profits has not been achieved through delivering a better service to consumers at all. Higher interest rates have not been passed on to savers; they have been hoarded by the banks, creating a windfall for them of many billions for doing nothing productive.Such a transfer from the public to banks would be unjustifiable at any time, but it is especially so when so many people are struggling to cover the essentials and our public services are on their knees due to Tory cuts. The banks should face the same type of tax on their unearned and underserved windfalls as the energy companies.The pre-tax profits of the big four banks—Lloyds, Barclays, HSBC and NatWest—show why that would be a just tax. In the first nine months of 2023, they made a staggering £41 billion in pre-tax profits, which is almost double the £23 billion they made in the same period last year, according to research by Unite the union. The question we must answer is this: will we allow the Government to claim that more austerity and cuts are inevitable and that public investment is unaffordable, or are we to build a better tax system that focuses on making the wealthiest pay their fair share?
- On that point about a better tax system, my understanding is that business likes certainty and that banks, like businesses, need to be able to predict the future fiscal regime, but earlier this year this Conservative Government cut the bank surcharge from 8% to 3%. So rather than a one-off windfall tax, would it not be better to reinstate the bank surcharge at 2016 levels, reinstate the bank levy at its previous rate from earlier this year and so have an additional £18 billion for His Majesty’s Revenue and Customs between now and 2027?
- The hon. Member makes a valuable intervention. I will come to how it was unjustifiable for the Government to reduce the surcharge in that way. Both approaches are possible and desirable, with yes, a windfall tax, but also reversing that cut.If we build a fairer, better tax system that focuses on making the wealthiest pay their fair share, we can invest in rebuilding the economy so that it serves the majority of people, we can invest in renewing our public services, and we can give people back some hope. A windfall tax on unexpected and undeserved bank profits can play an important role in creating that fairer tax system. Banks are not reinvesting their profits in the economy; they are handing out huge pay and bonuses, which could go even higher, aided and abetted by the Government’s decision to scrap the bonus cap.That all comes at a time when the banks are turning their backs on local communities. As the hon. Member for Strangford (Jim Shannon) mentioned, bank branches have been disappearing from our high streets at an alarming rate. Since 2015, almost 6,000 branches have permanently closed their doors. At a time of deepening social crisis, while banks collect record profits, they have made it even more difficult for working people to access their finances and get financial advice.
- Does the hon. Member not feel that there is something immoral about banks making high profits, closing branches and seeing their profit margins actually grow, while people are being left disadvantaged? There is something immoral about that. People are being disadvantaged, while others are making more.
- The hon. Gentleman is completely correct: there is something immoral about the way that banks’ profits are soaring while they are not delivering a better service for their customers, particularly vulnerable customers—the less affluent, the disabled and the elderly. That is not how we should be going about things, and he makes an important moral case.Based on the latest quarterly results, a windfall tax in the UK could raise between £4 billion and £16 billion this year from the profits of the big four banks alone, depending on the form that that windfall tax takes. That is billions of pounds that could be used to boost public investment and to tackle the soaring inequality that we are facing. Spain’s progressive Government offer us an example. They introduced a 4.8% windfall levy on certain bank incomes and commissions above a threshold of €800 million. Replicating that here could raise almost £4 billion this year. Even Margaret Thatcher introduced a form of windfall tax, with a 2.5% tax on banks’ non-interest-bearing deposits. In words that sound all too familiar today, Thatcher said that the banks had“made their large profits as a result of our policy of high interest rates rather than because of increased efficiency or better service to the customer.”Such a tax in the UK, according to Positive Money calculations, could raise up to £11 billion today, and a windfall tax, in whatever from, would be popular. According to a poll commissioned for the TUC, three quarters of the public support a windfall tax on banks’ excess profits, including 76% of people who voted Conservative in 2019.Perhaps the simplest move—we heard this in an earlier intervention—would be to reverse the tax break for banks that the Government introduced in last year’s autumn statement. They slashed the bank profits surcharge from 8% to 3%, saying that this was to cushion them against the impact of higher corporation tax rates. But this surcharge, along with the banking levy, was one of the special taxes raised on banks after the financial crash due to the greater risks that banks posed to our wider economic stability. The risk they pose clearly still remains and so too should the surcharge.
- 7:39 pm
- I congratulate the hon. Member for Leeds East (Richard Burgon) on securing this debate. He is an assiduous attender in the House, he cares a lot about these issues and I respect him deeply. In particular, I love his conversion, like that of his very good friend the Leader of the Opposition, to quoting and loving Margaret Thatcher. I cannot wait to hear the reports of how that goes down when he visits his local Labour party at the end of the week.I am pleased that this debate provides me with an opportunity to set out the measures that the Government have already taken to ensure that banks make a fair and sustainable tax contribution, but before I get on to that, I cannot resist dealing with some of the points that the hon. Gentleman made about the economic context in which this country finds itself. He mentioned economic growth. It is important that he recognises that when they assessed the autumn statement that the Chancellor recently delivered to the House, the Office for Budget Responsibility and independent forecasters said that the pro-growth measures it contained represented the largest boost to economic growth over the forecast period of any fiscal event in a generation.I think the hon. Gentleman said that austerity and public sector cuts were somehow inevitable, and that somehow the Treasury, Chancellor and Government felt that that was a good thing. We completely reject that characterisation. All I would say is that borrowing an extra £28 billion, as proposed by his Front-Bench team and the shadow Chancellor—I do not know whether it is the hon. Gentleman’s idea or proposal—will end up raising inflation and raising interest rates, which is what makes austerity and cuts more likely.Let me deal with the real substance of the hon. Gentleman’s remarks on the banks and a windfall tax. First, it is important to highlight that financial and related professional services are a vital part of the UK economy. They employ nearly 2.5 million people, two thirds of them outside London. Indeed, I am sure that the hon. Gentleman has many members of Leeds’ thriving financial and professional services sector in his constituency.
- I opened one of those banking hubs a fortnight ago in Axminster. I agree with the Minister that it is fantastic to see those facilities and I know my constituents are very grateful. When will we see the opening of the next tranche, such as a banking hub for Sidmouth?
- This is a rolling programme. We are trying to speed it up and in due course there will, of course, be changes and updates to it.It is equally important that banks make an equitable and sustainable tax contribution, and the Government have taken significant steps since 2010 to ensure that. First, as the hon. Member for Leeds East knows, we introduced the bank levy in the wake of the financial crisis. It was designed to encourage banks to move away from risky funding models and ensure that they make a fair contribution. The levy has raised vital revenue to help fund the public services we all rely on—over £28 billion so far—and, long after the financial crisis, it continues to bring in over £1 billion a year.Secondly, in 2016 we introduced the bank corporation tax surcharge. Banks currently pay an additional 3% rate of tax on their profits, which, when combined with standard corporation tax, means that banks pay more tax on their profits—we would not know it from the hon. Gentleman’s speech—than most other businesses, and a higher overall rate than when the surcharge was at 8%. The surcharge has raised over £13 billion and continues to bring in over £1.3 billion a year. We have also taken action to prevent banks from claiming tax relief on losses incurred during the financial crisis or on compensation payments for payment protection insurance and other cases of misconduct.This money is the public’s money. These measures help to support the needs and ambitions of our country’s citizens when it is appropriate for the state to do so. I know that that is why the hon. Gentleman is so keen to see a windfall tax introduced. I share his concern for supporting the interests of his fellow citizens, but the measures I have outlined demonstrate how the Government already ensure that banks make a fair and sustainable tax contribution.Having outlined how our current approach has generated significant tax revenue for the UK, I want to conclude by turning to how deviating from the approach I have set out—for example, by adopting a windfall tax as the hon. Gentleman suggests—would carry significant risk for the health and competitiveness of our banking sector, which in and of itself would be a significant risk for the health and competitiveness of our economy.
- 7:48 pm
- House adjourned.