Lloyds Executive Criticises Chancellor for Linking Bank Tax Rise to Energy Bill Support

A top executive at Britain's Lloyds Banking Group has criticised the decision to link a higher bank levy to support for household energy bills. The bank's chief financial officer, William Chalmers, warned the government against extending the higher levy beyond March 2028.

Speaking to journalists during an earnings call on Thursday morning, Chalmers said the bank very much hoped that yesterday's tax increase was indeed a temporary measure, adding that this mattered to ensure the business environment remained consistent with supporting long-term investment.

His 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, from 3% to 6% from January. Healey said the increase would be 'time limited', lasting 15 months in order 'to pay for immediate support on energy bills'.

Chalmers questioned the linkage between energy costs and bank taxes. 'We hope this tax rate is limited,' he said. 'When we look forward: what impact, if any, will energy prices have on that? Well, I don't see an obvious linkage between energy prices and bank taxes.'

He added that it was important for the UK banking sector to deliver banking services to businesses, households and communities in a cost-effective way, in order to promote UK growth, and that it was also important for the sector to stay internationally competitive.

Chalmers acknowledged that the economic environment was challenging but said this should not come at the expense of the banking sector, as it provides the loans that could fuel UK growth. Lending into the real economy, he said, was the best defence against energy price impacts on the UK economy.

The Treasury has promised to legislate for the 15-month limit in the finance bill. However, senior bankers and industry lobbyists have privately questioned whether a further energy crisis could throw that limit out the window. Some pointed to Spain, where a two-year windfall tax on banks, introduced in 2022 to alleviate cost-of-living pressures, was ultimately extended a further three years and increased from 4.8% to 7% for the country's largest banks.

'We are a major taxpayer,' Chalmers said. 'We paid around £1.8bn of corporate taxes year to date, and it is important to us that we have a stable and a predictable tax regime.'

Lloyds on Thursday also revealed its third-quarter results. Pre-tax profits almost doubled from a year earlier, from £1.2bn to £2.3bn. However, that increase largely reflected the £800m hit it took last year after setting aside money for compensation over the motor finance scandal.

Its results were also supported by a 10% rise in net interest income, which measures the difference between what the bank charges borrowers and what it pays to savers. Net interest income has risen across the banking industry, as inflation expectations, driven by higher fuel prices triggered by the war in the Middle East, pushed up interest rates.