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Banking stocks in London were hit on Friday by reports that UK Chancellor Rachel Reeves could target the sector to help shore up public finances. UK lenders NatWest Group PLC, Lloyds Banking Group PLC and Barclays PLC fell 4.9%, 3.8% and 3.3% respectively in London on Friday morning. They were the top three fallers in the FTSE 100 index, which itself was down 0.3%. On Friday, a report by the Institute for Public Policy Research argued the Treasury should impose a new levy to recoup ‘windfalls’ made by lenders as a legacy of the Bank of England’s quantitative easing programme, undertaken in the wake of the financial crisis. The think-tank said the UK taxpayer is spending £22 billion a year compensating the BoE for losses on the programme. The scheme entailed the BoE purchasing hundreds of billions of pounds of government bonds, buoying commercial bank reserves at the central bank. These are now being remunerated at the BoE’s official rate, which stands at 4%. The IPPR said this ‘subsidy’ of commercial banks, at the expense of public services, is boosting bank profits while millions face the cost-of-living crisis. The IPPR recommended that the Treasury introduce a QE reserves income levy on commercial banks to save £7 billion to £8 billion a year over this parliament. In addition, it suggests the BoE slows down quantitative tightening, by ending its fire sale of government bonds to save more than £12 billion a year. 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.’ The Financial Times on Friday said fears are mounting that the autumn budget will target banks to help fill £20 billion fiscal hole. ‘Politically it is an easy target,’ a senior banker told the FT. ‘No one likes banks, they are seen as a whipping boy for the government.’ The UK chancellor is facing a squeeze on the public finances amid sluggish economic growth and the rising cost of government debt. But bank bosses have warned of the dangers of such a move. At the time of second-quarter results, Lloyds Chief Executive Charlie Nunn said increased taxes ‘wouldn’t be consistent’ with the government’s growth agenda. NatWest CEO Paul Thwaite insisted ‘strong economies need strong banks’. No date has been announced for the autumn budget. It is expected to be late October or early November. Copyright 2025 Alliance News Ltd. All Rights Reserved.
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