Lloyds Banking Group PLC (LSE:LLOY), HSBC Holdings PLC (LSE:HSBA), Barclays PLC (LSE:BARC) and NatWest Group PLC (LSE:NWG) made an additional £7bn in 2022 on the back of interest rate rises, according to trade union Unite.
Unite slammed the ‘big four’ UK banks for treating Bank of England interest rate hikes “as a licence to pick the pockets of householders across Britain,” rather than passing the extra money on by raising their own rates for depositors.
Unite, citing ONS data, also claimed that spending on financial services had pushed up household inflation by as much as 1.5%, “worsening the cost of living crisis”.
The BoE began raising interest in late 2021, with the figure hitting 3.5% by December 2022 and then reaching 4.25% after the most recent hike on Thursday.
Banks are further being called on to pass on the extra capital generated from borrowers ahead of the government’s planned decrease in surcharges from 8% to 3% in April, which was confirmed by chancellor Jeremy Hunt in the latest budget.
After the rule change “banks will have no excuses for continuing the unfair practice of taking so long to pass on interest rate hikes to savers,” My Community Finance founder Tobias Gruber said.
“If banks do not start behaving more conscientiously,” he added, “the Financial Conduct Authority should absolutely intervene and force their hand”.
Fran Boait, executive director of research and campaign group Positive Money, said “a windfall tax on banks is necessary today for the same reason the Thatcher government deemed it necessary in the early 1980s.”
“Banks are seeing their incomes soar not from any increased efficiency or better service to customers, but simply as a side-effect of higher interest rates,” she continued
Greg Taylor, head of banking and finance at MHA Macintyre Hudson, agreed, saying it is “hard to argue against windfall taxes on banks” especially given the current cost of living crisis.
But Taylor recommended any windfall tax should have a sunset clause ensuring the tax falls away after three years in order to retain competitiveness, adding that “hopefully by then we will have ridden out the current volatile economic conditions”.
Last year, the UK’s big four banks posted combined profits of £33bn, a 42% rise on pre-pandemic levels, aided by charging higher interest rates.
Unite general secretary Sharon Graham called on the government to “wake up” and act on the rampant profits, adding: “It’s only by taking on runaway profiteering that we can end the cost of living crisis.”