Bank Tax Battle: Andy Burnham Faces Windfall Tax Pressure

Published: 5 August 2026. The English Chronicle Desk. The English Chronicle Online

A potential new battle between the UK government and the banking industry is emerging as campaigners urge Prime Minister Andy Burnham to introduce a windfall tax on bank profits after Britain’s biggest lenders reported record earnings.

The debate has intensified following a bumper financial period for major UK banks, which have benefited from higher interest rates and market volatility linked to global instability, including the economic effects of the war in Iran.

The country’s four largest lenders — HSBC, NatWest, Barclays and Lloyds — recorded combined profits of £29.2bn during the first six months of the year. Almost half of that amount, around £13.7bn, has been returned to shareholders through dividends and share buybacks.

The figures have strengthened calls from trade unions and campaign groups for banks to contribute more towards government efforts to reduce living costs and fund major reforms, including plans to overhaul social care.

Campaigners argue that banks are in a stronger position than many households and businesses struggling with higher prices.

“This is not a ‘hard choice’,” said Paul Nowak, general secretary of the Trades Union Congress. “Banks can easily afford to pay more tax.”

He argued that a tax increase on bank profits could provide additional funding to help households facing pressure from rising energy costs and inflation.

The campaign group Positive Money has also called on the government to introduce a windfall tax, saying the proceeds could be used to support families and businesses affected by economic pressures.

However, Andy Burnham has so far avoided making a clear commitment on whether his government would introduce a bank profits tax.

In June, the prime minister said he wanted to provide people with immediate support while maintaining responsible management of public finances.

“While not taking risks with the public finances, I will seek to give Britain some breathing space as soon as I can,” Burnham said.

The banking industry is already preparing to oppose any potential tax increase, drawing on a long history of disputes with governments over additional charges imposed after the 2008 financial crisis.

Banks argue that higher taxes could reduce their ability to lend money, weaken investment and slow economic growth.

Some senior executives have warned that continued tax increases could influence decisions about future investment in Britain.

Jamie Dimon, chief executive of US banking giant JP Morgan, recently criticised previous additional taxes imposed on the financial sector, warning that excessive costs could force companies to reconsider their commitments to the UK.

“We paid probably $10bn (£7.4bn) in extra taxes by now. I don’t think that’s right or fair,” Dimon said.

“If that happens too much, we will reconsider.”

UK bank leaders have also pushed back against calls for higher taxation.

NatWest chief executive Paul Thwaite said strong banks were essential for strong economies and warned that tax increases could affect lending.

“If you want strong economies, you want strong banks,” he said. “It’s really important to have consistency and stability of policies.”

Barclays has similarly argued that banks play a key role in supporting economic growth by providing loans to businesses and consumers.

The bank’s chief financial officer, Anna Cross, said the industry’s contribution to economic recovery should be considered when policymakers discuss taxation.

“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, is really important for the health of the economy,” she said.

The argument echoes previous battles between governments and banks over taxation.

Following the 2008 financial crisis, when several banks required taxpayer-funded support, the coalition government introduced the bank levy in 2010.

The measure was designed to recover money from large financial institutions by taxing parts of their balance sheets.

The policy immediately faced opposition from banking leaders.

HSBC was among the strongest critics, with then-chief executive Stuart Gulliver warning in 2015 that increasing regulatory burdens and the cost of the bank levy could lead the company to reconsider its UK headquarters.

The warning raised concerns about the future of London as a global financial centre.

Former chancellor George Osborne responded by reducing the scope of the levy, limiting it mainly to UK-based balance sheets rather than global assets.

He also reduced the rate from 0.21% to 0.10%, cutting the expected annual revenue from the measure.

At the same time, the government introduced a separate 8% surcharge on bank profits to ensure the sector continued contributing additional tax revenue.

Later, former chancellor Rishi Sunak reduced this surcharge to 3% from 2023, amid concerns that Britain needed to remain competitive with financial centres such as New York and Hong Kong.

But the debate returned after the Covid pandemic, when rising interest rates helped banks generate significant profits while many households faced a severe cost-of-living crisis.

In 2023, MPs on the Treasury Committee criticised major lenders, accusing them of benefiting from higher rates while customers struggled with increased mortgage and borrowing costs.

Several European countries, including Italy and Spain, introduced temporary windfall taxes on banks to help fund support measures for households.

The possibility of similar action in Britain has remained politically controversial.

Campaigners have suggested alternative ways of increasing contributions from banks.

The Institute for Public Policy Research has highlighted the profits banks receive from reserves held at the Bank of England and suggested a new levy targeting those gains.

The thinktank argued that changes introduced during quantitative easing created significant benefits for commercial banks, while increasing pressure on public finances.

Banks have rejected accusations that they are avoiding their responsibilities.

Industry representatives point out that the banking sector already pays significant amounts in taxes.

UK Finance has estimated that British banks face an overall tax burden of around 46.4% when corporation tax, employment taxes and other charges are included.

The organisation argues this compares unfavourably with rival financial centres, including Frankfurt and New York.

As Burnham’s government considers measures to address living costs and fund public services, the question of whether banks should pay more is likely to become one of its most politically sensitive economic decisions.

A windfall tax could provide billions of pounds in additional revenue, but it risks creating another confrontation with one of Britain’s most powerful industries.

The coming months may determine whether the government chooses to challenge the City or avoid a policy battle that previous administrations have struggled to win.

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