Lloyds Banking Group has challenged the government’s decision to fund household energy bill support through higher bank taxes, with its chief financial officer urging ministers to keep the increase temporary. William Chalmers questioned the connection between energy costs and banking taxation as the sector faces a higher surcharge for 15 months, The Guardian Business reported.
Chancellor John Healey announced that the surcharge, paid in addition to corporation tax, would double to 6% from January. The increase is intended to finance immediate help with energy bills and is due to expire in March 2028. According to the report, the Treasury has pledged to put the 15-month limit into legislation through the finance bill.
Speaking to journalists during Thursday’s earnings call, Chalmers acknowledged difficult economic conditions but argued that support for households should not come at the banking sector’s expense. He said banks needed to provide competitively priced services and loans to businesses, households and communities to support growth, while remaining internationally competitive. A stable tax framework was also important for long-term investment, he argued.
The concern among bankers is that linking the surcharge to energy support could create grounds for extending it, or raising it again, if energy pressures persist. The Guardian Business reported that senior bankers and industry representatives had privately questioned whether the promised deadline would survive another energy crisis. Some cited Spain, where a bank windfall tax initially introduced for two years to address cost-of-living pressures in 2022 was extended by three years, with the rate for the largest banks rising from 4.8% to 7%.
Chalmers said Lloyds had paid about £1.8bn in corporate taxes so far this year. The bank also reported third-quarter pre-tax profit of £2.3bn, up from £1.2bn a year earlier. Much of that improvement reflected the previous year’s £800m provision for motor finance compensation. Results also benefited from a 10% increase in net interest income, the difference between interest charged to borrowers and paid to savers. The Guardian Business linked wider industry gains in that income to higher interest rates, as fuel price increases associated with the Middle East war lifted inflation expectations.