A senior Lloyds Banking Group executive has publicly challenged Chancellor John Healey’s decision to link higher bank taxes to household energy bill support. William Chalmers, the bank’s chief financial officer, warned the government against any potential extension of the levy beyond its scheduled expiration in March 2028.
Speaking during an earnings call on Thursday, Chalmers acknowledged the current economic environment remains challenging. However, he cautioned that easing cost-of-living pressures for households should not come at the expense of the banking sector, which plays a critical role in providing loans to stimulate UK growth. He argued that the industry must be able to deliver cost-effective services to remain internationally competitive. “We therefore very much hope that yesterday’s tax increase is indeed a temporary measure, to help ensure the business environment remains consistent with supporting long-term investment,” Chalmers told journalists during an earnings call on Thursday morning.
The criticism follows the Chancellor’s announcement that the bank surcharge, which is applied on top of standard corporation tax, will double to 6% starting in January. Healey described the increase as a time-limited measure intended to run for 15 months to fund immediate energy bill relief. The comments came less than 24 hours after the chancellor, John Healey, announced plans to double the bank surcharge, which is levied on top of corporation tax, to 6% from January.
Chalmers questioned the logic behind tying bank taxes specifically to energy costs.
He noted that he sees no obvious link between energy prices and banking sector taxation, adding that the ability to lend into the real economy is the most effective defense against energy-related economic impacts. The executive emphasized that for Lloyds, maintaining a stable and predictable tax regime is paramount, noting the bank has already paid approximately £1.8 billion in corporate taxes year-to-date.
While the Treasury has pledged to legislate the 15-month limit, industry lobbyists and senior bankers have expressed private skepticism, fearing that a future energy crisis might lead to further extensions. Some observers have cited the example of Spain, where a temporary windfall tax on banks was ultimately extended and increased. Where a two-year windfall tax on banks, meant to alleviate cost of living pressures in 2022, was ultimately extended a further three years, and increased from 4.8% to 7% for the country’s largest banks, some pointed to Spain.
Financial results released on Thursday showed Lloyds’s pre-tax profits nearly doubling from £1.2 billion to £2.3 billion compared to the previous year. This growth was bolstered by a 10% rise in net interest income, as the bank continued to profit from higher interest rates. The figure also reflects the absence of an £800 million charge related to the motor finance compensation scandal that impacted the bank last year. From £1.2bn to £2.3bn, lloyds revealed on Thursday that its third-quarter pre-tax profits almost doubled from a year earlier. Which measures the difference between what it charges borrowers and what it pays to savers, showing the bank continued to benefit from higher interest rates, the bank’s results were also supported by a 10% rise in net interest income.
Net interest income across the sector has trended upward, driven by rising inflation expectations and interest rate hikes tied to fuel price increases resulting from conflict in the Middle East.
