Big UK banks have earned massive profits in the first half of the year, sparking calls for new taxes. The four biggest lenders—Natwest, Lloyds, Barclays and HSBC—have surpassed financial forecasts, with some boosting income predictions. They returned £13.7 billion to shareholders, which has made activists push for a windfall tax. The UK’s four largest lenders reported £29.2bn in profits over the first six months of the year, with almost half, £13.7bn, pledged to investors through dividends and share buybacks.
Positive Money, a policy group, argues that banks can and should pay more. They say a windfall tax could take up to £19 billion from the top four banks alone. The group wants Prime Minister Andy Burnham to break with past leaders and resist pressure from City of London lobbyists. Activists are using the banks' recent performance as a rallying point, arguing that the sector has enough room to absorb further levies. Campaigners say raising taxes on their earnings could yield £19bn from the big four banks alone, helping to offset the price of the prime minister Andy Burnham’s ambitious plans to slash living costs and overhaul the UK’s social care system.
Bank chiefs avoid comment
Bank leaders are staying quiet on the tax debate. Lloyds CEO Charlie Nunn kept dodging questions, saying tax decisions are up to the government. Natwest’s Paul Thwaite stressed the need for strong banks but gave no hint on whether he supports tax increases. Barclays said its loans would be crucial to supporting Burnham’s growth agenda, suggesting any constraints on its finances could weigh on the funding available to business and consumers. “We think that the track record that we and the other banks have, in terms of supporting UK growth and indeed leaning into UK lending in the way we have … is really important for the health of the economy,” the chief financial officer, Anna Cross, said last week. “We hope that that will be considered.”
HSBC’s Georges Elhedery highlighted the bank’s UK presence, including its headquarters in Birmingham and a big call center in Swansea. But this hasn’t stopped activists from pushing. Dianne Abbott, a senior House of Commons member, criticized Barclays for expanding bonuses, saying the government should use taxes more wisely. She pointed out that Barclays has deepened its bonus pool while shareholders have received generous returns. Some influential executives have already fired warning shots, saying crucial lending could be throttled and that lucrative investments – such as JP Morgan’s £3bn Canary Wharf HQ – could be on the line.
Budget uncertainty grows
Clarity may come in October when Chancellor John Healey delivers his first Budget. He’s committed to fiscal discipline, while Burnham has costly spending plans. The government must balance these, and banks brace for a possible tax push. The new government has faced immediate pressure to address how it will fund Burnham’s ambitious agenda, particularly in the face of the ongoing cost of living crisis. Burnham has not made any specific comments about a bank tax so far. However, in June he said people needed help now with rising costs. “While not taking risks with the public finances, [I] will seek to give Britain some breathing space as soon as I can,” he said.
Jamie Dimon of JP Morgan warned of the risks. His company paused a £3 billion London tower project until business rate exemptions are sorted. Dimon made it clear the company won’t proceed without full exemption, showing how tax issues could hurt big investments. The government had delayed the approval process, and the legal bureaucracy has left the firm waiting. The TUC’s general secretary, Paul Nowak, said: “Andy Burnham has rightly prioritised cost of living measures in his first days as prime minister, but as the war in Iran rumbles on, energy prices will rise further – and the government will need to do more to protect households. That’s why it’s time to increase the tax on bank profits to cut bills.”
The government has yet to respond, but pressure is rising. Campaigners watch closely, shareholders seek stability, and the Budget will be a key moment. It will show how banks cope with new financial challenges. The TUC’s Nowak said: “This is not a ‘hard choice’. Banks can easily afford to pay more tax. This is a chance for the new prime minister and chancellor to show whose side they’re on.”
For years, the UK’s top banks used Rachel Reeves’ strategy to stay out of the spotlight. Her policies gave them two chances to avoid a cash grab, and banks lined up to show new investments. But with Andy Burnham and John Healey now in charge, the approach is changing. Banks are preparing for a different response to tax demands. The shift in leadership may mean the government is less likely to bend to financial sector lobbying. The NatWest chief executive, Paul Thwaite, said tax rises would hold back lending and harm the economy. As he reported a 29% profit increase, he said: “If you want strong economies, you want strong banks. It’s really important to have consistency and stability of policies.”
The new government has not yet announced a tax plan, but it has pledged to manage finances carefully. Burnham’s spending commitments and the need to meet fiscal targets mean the tax question will be central. Whether the banks will face higher levies or get more leeway remains unknown. The sector is watching the Budget with particular interest, as it will shape the financial environment for the rest of the year. The banks’ lobby machine will now be keen to prove that Burnham’s growth plans could be dead in the water without the City’s support.
Meanwhile, investors and industry groups are watching for signs. The recent reports from banks show strong results but also highlight the need for tax reform. How the government responds will shape the financial landscape for months to come. The coming months will test how far the banks are willing to go to resist potential changes and whether the government will respond to the mounting pressure from campaigners. Windfall taxes on banks have long been controversial, even as bank bosses have struggled to shake off the reputational damage of the 2008 financial crisis.
