UK (Parliament Politics Magazine) – Charlie Nunn has warned that increasing taxes on banks could threaten economic stability, even as Lloyds reported a 17% jump in profits.
As reported by The Guardian, Charlie Nunn warned Rachel Reeves that raising bank taxes in the autumn budget could undermine Labour’s hopes of using the City of London to revive the economy.
Lloyds’ CEO said increasing tax on finance would clash with the government’s push for a renewed economic agenda.
What did the Lloyds CEO say about Reeves’ tax plans?
Charlie Nunn admitted that Lloyds had not discussed any potential tax hikes with the government, calling it a political decision.
He argued that increasing taxes on the financial sector would signal a U-turn from the chancellor’s recently unveiled plans. Those plans aimed to cut red tape and strengthen the City’s economic role.
Mr Nunn pointed out that Ms Reeves had supported a strong financial sector, highlighting its key role in helping both households and businesses.
He said,
“We definitely believe that’s an important thing to focus on, and obviously, therefore, [it] wouldn’t be consistent with a tax rise.”
Mr Nunn Britain’s financial services were already more heavily taxed than those in other major economies. Banks pay 25% in corporation tax, a 3% surcharge, and an additional bank levy based on their balance sheets.
He stated,
“We’re proud of being one of the biggest taxpayers in the UK as Lloyds Banking Group. So we are completely comfortable with that. But it is important when you look at the competitiveness of the City of London and the financial services sector that we remain a competitive tax regime.”
When questioned about Ms Reeves’ claim in her Mansion House speech that regulations were acting like a “boot on the neck” of business, Mr Nunn responded, “That’s very much for the chancellor to use that language.”
Though the banking executive said there was a “real opportunity to align regulation, increasingly, with competitiveness and growth.”
The Lloyds chief endorsed plans to revisit ring-fencing rules in the coming months. These rules were introduced after the financial crisis to protect consumer money from banks’ riskier activities.
Mr Nunn and other senior bankers have pushed for the removal of ring-fencing rules. They argue these rules are no longer necessary due to financial reforms introduced after the 2008 crash.
How is Labour planning to support the City post-Brexit?
Labour has confirmed that financial services are one of eight vital sectors in its industrial strategy. But industry groups have warned the chancellor that extra support is needed if the City is to regain its strength after Brexit.
Research from UK Finance and PwC shows that British banks pay around 45.8% in total taxes, including VAT and employment levies, far above the rates in rival financial hubs like Frankfurt and New York.
How will tax hikes and legal payouts affect UK lenders post-scandal?
UK banks could face further financial pressure if taxes rise, as lenders like Lloyds prepare for potentially massive compensation payouts linked to the car finance commission scandal. A Supreme Court decision is expected within days.
Lloyds Bank posted a 17% rise in pre-tax profits for the second quarter, reaching nearly £2bn, up from £1.7bn during the same period last year. The bank earned more money from pensions, insurance, and investments, which helped profits grow.