UK bank shares fall as City fears budget tax raid – business live | Business

Shares in UK banks are falling this morning as the sector fears it could be targeted in the autumn budget.

NatWest (-3.7%), Lloyds Banking Group (-2.8%) and Barclays (-2.3%) are leading the fallers on the FTSE 100 share index, reflecting rising concerns that chancellor Rachel Reeves could target banks to help shore up the UK’s public finances.

The IPPR think tank is this morning proposing that Rachel Reeves should levy a new bank tax. They argue that a “Thatcher-style tax on bank windfalls” could raise billions for public services.

The IPPR points out that the UK government is currently spending billions of pounds a year compensating the Bank of England for losses on its quantitative easing programme, which is now being unwound.

The BoE is also paying out higher interest rates on banks’ reserves than it is receiving on the bonds it still owns through QE.

In total, these losses amount to a £22bn-a-year hit to the public finances, according to the IPPR, which is calling for the Treasury to tax the big banks on their QE-related reserves.

Carsten Jung, associate director for economic policy at IPPR, said:

“The Bank of England and Treasury bungled the implementation of quantitative easing. What started as a programme to boost the economy is now a massive drain on taxpayer money. Public money is flowing straight into commercial banks’ coffers because of a flawed policy design. While families struggle with rising costs, the government is effectively writing multi-billion-pound cheques to bank shareholders.

“This is not how QE was meant to work – and no other major economy does it this way. A targeted levy, inspired by Margaret Thatcher’s own approach in the 1980s, would recoup some these windfalls and put the money to far better use – helping people and the economy, not just bank balance sheets.”

The Financial Times reports that fears are growing in the City of London that Reeves could announce a surcharge on the banking sector’s profits, or a new bank levy.

One City figure told the FT:

“We aren’t stupid. There’s a bunch of Labour MPs, including Angela Rayner, who are looking for ways to get more money. Financial services are an obvious target.”