Lloyds Banking Group's chief executive has cautioned the government against imposing further taxes on banks ahead of the Budget on 28 October, warning that such measures could harm economic growth. Charlie Nunn told the Financial Times that windfall taxes on successful sectors were not the right approach, saying "we are not in an era of windfall returns" and urging policymakers to "look at the UK economy as a CEO would" to drive productivity.
Banks are widely expected to face additional taxation in the upcoming Budget, the first since Prime Minister Andy Burnham appointed John Healey as chancellor. Nunn noted that in his decade at HSBC working across 50 countries, regulators and governments typically focused on how to drive productivity and growth rather than taxing successful sectors. "The UK seems to have moved away from that approach since the financial crisis," he said, adding that most other parts of the world recognised that "if you kill banking, you're killing the ability of your economy to borrow and invest."
Tax experts at Blick Rothenberg highlighted a significant concern: the last time banks faced a windfall tax, the wider corporation tax rate was actually lower than it is now, meaning any fresh levy would represent a substantially bigger overall hit to the sector. Since banks typically determine their investment decisions based on expected rates of return, a lower projected return in the UK might lead them to invest less domestically and pursue bigger opportunities overseas, particularly affecting multinational institutions such as Barclays and HSBC.
Nunn expressed more optimism about other potential drivers of economic growth, particularly the government's devolution agenda and artificial intelligence. He said the devolution approach, when executed properly, could "unlock the ability for government to actually get stuff done" by allowing local combined authorities and mayors to connect local assets such as land, businesses and universities. Regarding AI, Nunn described it as offering a "massive opportunity" for reskilling workers and providing better customer advice on investments, though he warned that regulators had not yet fully considered the consequences if things go wrong for customers.
For UK savers, borrowers and businesses, higher bank taxes could mean reduced domestic investment and lending capacity if financial institutions direct capital elsewhere to seek better returns.