Britain should tax bank windfalls: banks that were publicly rescued and now profit from high interest rates owe the public more
Source: https://www.theguardian.com/profile/editorial. "The Guardian view on the banks: too big to fail cannot mean too big to tax | Editorial | The Guardian." October 16, 2026. www.theguardian.com
The Gist
Banks are making huge profits mainly because interest rates are high, while ordinary savers and borrowers lose out and taxpayers cover some of the costs. Since the public bailed the banks out in 2008, the Guardian argues, banks should pay substantially more tax now, and the government should not be swayed by their complaints.
Conclusion
The UK government should increase taxation on banks, restoring the surcharge at minimum and ideally imposing a windfall tax or deposit levy, and should resist City lobbying, because banks that were rescued by taxpayers cannot also be too big to tax.
Premises
- Britain's biggest banks have made record profits (£29bn in the first half of 2026, up a fifth on 2025, and £200bn over five years), largely because of higher interest rates rather than better products or services.
- Banks are benefiting at public expense: borrowers pay more, savers lost out on about £44bn in deposit interest in 2025, and the Bank of England pays banks tens of billions in interest on reserves, with the Treasury footing the bill.
- Banks' objections are weak: they already spend billions on dividends and buybacks (£7.7bn in Q1 2026) without reducing lending, so higher taxes could come out of shareholder payouts rather than productive lending, and banks face lower levies than oil and gas companies and are not taxed on windfall gains.
- There is precedent and workable models for stronger action: Thatcher's 1981 bank windfall tax, Spain's windfall levy, and proposals for a 2.5% deposit levy (£11bn+) or a fossil-fuel-style windfall tax (£19bn) dwarf the roughly £2bn raised by restoring the surcharge to 8%.
- A large finance sector is not good for the wider economy: research suggests most financial activity is negative for overall economic performance, bonuses are at post-2008 highs, and the sector poses risks of crises and weaker growth.
- Taxpayers rescued the banks after the 2008 crisis, and public protection carries public obligations.
Assumptions
- Bank profits driven by interest rate changes rather than by value-added services are unearned windfalls that are legitimate targets for special taxation.
- Higher bank taxes would be absorbed by shareholders and bonuses rather than passed on to customers or reducing lending.
- The implicit public guarantee of banks creates a moral and fiscal obligation to the public that justifies extra taxation.
- Revenue from bank taxes can be put to productive public use (e.g. adult social care) without offsetting economic harm.
- Finance lobbyists' interests diverge from the genuine national interest in growth.