By Richard Burgon MP
I led a parliamentary debate this week calling on the Government to introduce a windfall tax on the banks. Labour Hub readers will not be surprised to hear the Tories did not agree!
But this is a demand that the entire labour movement should get behind as part of our campaign for fairer taxes on the rich to provide much-needed funds for our public services and to help those hit hard by the economic crisis.
In contrast, the Tories plan another wave of brutal austerity. We know from the last 13 years of cuts and trickle-down economics the harm that more austerity would do to millions of people.
This Tory dogma has created over a decade of economic stagnation. British economic growth was recently downgraded again.
We are living through the largest fall in living standards since records began 75 years ago. 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.
All this means that income inequality in the UK is higher than in any other large European country.
This Tory cuts agenda has 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.
Of course, 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%. Because it has not been a time of crisis for the elites. For them, it has been boom time.
There have never been so many British billionaires and they are richer than ever, having increased their wealth by an eye-watering £120 million every single day over the past decade. According to Unite the Union research, the profits of the UK’s largest companies are now 89% higher than before the pandemic. Bosses’ pay at the largest 100 companies has been going up and up and has increased by 16% in the past year.
The question the entire progressive movement 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 people and corporations pay their fair share so that we can fund the social investment that is so desperately needed?
If we build a fairer, better tax system, we can raise billions to rebuild the economy so that it boosts living standards, we can renew 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 a fairer tax system. While millions of people struggle to pay their mortgages and rents, the banks have been cashing in and doing very well out of this crisis.
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. 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. 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.
So 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.
Contrary to what some might claim., the banks are not reinvesting their profits in the economy; they are handing out huge pay and record bonuses. Bonuses could get even higher following the Government’s decision to scrap the bonus cap.
And the banks have turned their backs on local communities too. 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.
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.
Spain’s progressive Government offers us one 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 could describe the situation 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.” Implementing such a tax today, according to Positive Money calculations, could raise up to £11 billion.
A Windfall Tax, in whatever form, would be popular too. 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.
Another approach would be to reverse the tax break for banks that the Government introduced in last year’s Autumn Statement. The Tories slashed the bank profits surcharge from 8% to 3%, claiming that this was to cushion the impact of higher corporation tax rates.
But this surcharge and the banking levy were imposed on the banks after the financial crash due to the greater risks that banks posed to wider economic stability. That risk clearly still remains today and so too should the surcharge.
TUC General Secretary Paul Nowak has rightly described the slashing of the surcharge as starving our public services of much-needed funds at the worst possible time. The TUC estimates that the Treasury will lose at least £1.5 billion per year from this policy change, while Positive Money estimates that reversing cuts to both the bank surcharge and the levy could raise more than £4 billion this year.
The banks were bailed out when they were in trouble during the 2007 global financial crisis. It is now time for them to be taxed fairly to help bail out communities that are suffering because of the Tory Party’s focus on building an economy that serves the wealthy few while the vast majority fall ever further behind.
A Windfall Tax on bank profits is a just policy, it is economically sound and would be welcomed by people across this country.

Richard Burgon has been MP for Leeds East since 2015 and served as Shadow Secretary of State for Justice from 2016 to 2020.

Image: Official portrait of Richard Burgon MP. Source: https://members-api.parliament.uk/api/Members/4493/Portrait?cropType=ThreeFour,  licensed under the Creative Commons Attribution 3.0 Unported license.