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Tory tax break for banks set to cost £6bn to the public purse, TUC report finds

A TORY tax break for banks is costing the Treasury at least £29 million a week, a TUC report has warned.

Ministers cut the bank profits surcharge from 8 to 3 per cent earlier this year, allowing firms to boost profits while being cushioning against the impact of an increased corporation tax rate.

Published today, the report estimated that the bung, introduced by Prime Minister Rishi Sunak when he was chancellor, will deprive the public purse of a minimum of £6 billion over the next four years.

Britain’s tax system is no longer fit for purpose and has allowed banks to “cash in on families’ mortgage misery” as schools and hospitals crumble, the TUC says.

The union confederation estimated that related tax revenue losses this year alone could exceed £2.5bn at a time when Britain’s four biggest banks — HSBC, Barclays, Lloyds and NatWest — have reported combined pre-tax profits of more than £41bn for the first three quarters of 2023, as a result of rising interest rates.

This is a nearly 400 per cent increase on the same period in 2020, before rates started rising — and suggests that the big four could be on track to make record annual profits of around £50bn this year.

TUC general secretary Paul Nowak said: “The Prime Minister’s decision to reduce the surcharge has starved our public finances and our public services of much-needed funds at the worst possible time.

“This boils down to political choices. Whether its slashing taxes for banks or gifting bankers unlimited bonuses, this is a government more interested in rewarding excess wealth than in governing for the public good.”

Campaign group Positive Money’s head of policy and advocacy Simon Youel said tax cuts to banks were never justified during a cost-of-living crisis.

“But this move is particularly hard to swallow when banks are reaping windfall profits from the same higher interest rates pushing households to the brink of destitution,” he added.

“The reason special taxes on banks were introduced after the financial crash was to reflect the greater risks they pose to our economic stability than other corporations. That risk hasn't gone away.”

The TUC report recommended raising the bank surcharge to 10 per cent and called for a windfall tax of 35 per cent to match the levy on energy companies.

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