Bank share prices tumble after calls for tax on profits

Following calls for the government to introduce a new levy on banking revenues, leading UK banks' share prices have plummeted. A windfall levy, according to the Institute for Public Policy Research (IPPR), could cost the government a whopping £8 billion per year. According to the think tank, the scheme would compensate taxpayers for the Bank of England's cash printing program's losses. Although the Treasury has not commented on any policy, fears have resulted in NatWest, Lloyds, Barclays, and Barcashes to be the top declineers on the London Stock Exchange's main index early Friday, with NatWest and Lloyds being the top

The shares of NatWest and Lloyds dropped by more than 4% in early trading, while Barclays fell by more 3%. Charlie Nunn, Lloyds bank's CEO, has previously spoken out against any potential tax hikes for banks. Want to be consistent with tax hikes as a result of tax hike growths, he said as efforts to boost the UK economy and foster a strong financial services industry. The Treasury has been contacted for comment. As the Bank of England's quantitative easing (QE) initiative was costing taxpayers £22 billion per year, the IPPR, a left-leaning think tank, said a levy on the profits of banks was needed. The Bank of England buys bonds - effectively long-lived IOUs - from the UK government and corporations to raise bond rates and lower longer-term interest rates. Some of these bonds are being auctioned off by the bank, and the IPPR has reported that it is now suffering huge losses from selling the government bonds below their purchase value and through interest rate losses. The IPPR characterized those interest rate declines as a government subsidy to commercial banks, and a slew of poor commercial bank profits in comparison to the pandemic were up by $22 billion. The tax recommendation comes as Chancellor Rachel Reeves faces the difficult challenge of retaining her fiscal laws while still finding space for investment promises in the forthcoming fall Budget.

'Public money flowing to banks' coffers'

The Bank and Treasury had bungled the introduction of quantitative easing, Carsten Jung, associate director of economic policy at IPPR and former Bank of England economist.

Public funds are flowing right into commercial banks' coffers due to a flawed legislative scheme,

he said.

While families are struggling with rising costs, the government is effectively writing multi-billion-pound cheques to bank owners. Mr Jung said the £22 billion taxpayer loss was about equal to

the entire budget of the Home Office every year,he said on BBC's Today programme.We're trying to fix this leak of taxpayer money,he said,and the first step will be a targeted levy on commercial banks that claws back some of these losses. A tax on the windfall profits related to QE would still leave the banks with substantially higher revenues, the IPPR study said, despite saving the government up to £8 billion a year over parliament's term. However, financial services body UK Finance said that a further levy on banks would make Britain less competitive globally.

Banks based here already pay both a corporation tax surcharge and a bank levy,

the trade association said. According to the group, a new financial services tax would also

run counter to the government's goal of assisting the financial services industry. Following the rumors, Russ Mould, AJ Bell investment director, said the UK stock market had soured, with investors asking

if the golden age of bumper profits, dividends, and buybacks is now under scrutiny.

The timing of the tax debate, which was fuelled by a think-tank IPPR study, is tragic,

he said.

The coincidence of this poll, which coincides with a recent Lloyds survey, shows a rise in company morale amid cost pressures. Since Labour gained control of the City, the Chancellor has worked really hard. Reeves said that banking control following the 2008 financial crisis had

gone too far. However, she faces difficult fiscal decisions in the run-up to her budget after the government slowed its proposed social investments and largely reversed winter fuel allowance cuts, which narrowed her budget headroom.