The largest banks in the United Kingdom are under pressure to raise interest rates for savers after figures revealed they have made an additional £7 billion by not doing so. Additionally, they stand to gain from Jeremy Hunt’s tax cut announcement.
The Unite trade union told banks that the dramatic rise in borrowing costs allowed them to make billions of pounds in extra profit when the Bank of England is anticipated to announce a further rise in interest rates.
By using the central bank base rate as the reference point, banks make money by imposing higher interest on loans compared to deposits. Even so, the industry has come under fire from all political quarters for passing on the increase to borrowers during the cost of living crisis more quickly than it did to savers.
As pressure on the banking industry grows, the Treasury Committee of MPs sent a written statement to the Financial Conduct Authority on Wednesday, requesting recommendations on the issue.
The Conservative chair of the committee, Harriett Baldwin, in a statement, stated: “While consumers should continue to shop around for the best rates, the information we’ve received from the UK’s biggest high-street banks demonstrates there is much more that can be done.”
Although the Bank of England base rate increased to 4%, last month the easy-access savings accounts offered by Barclays, HSBC, Lloyds Banking Group, and NatWest Group had to defend rates of less than 1.3%.
The lenders recorded an increase in net interest income of £7 billion compared to the same period in 2019 before the COVID-19 pandemic struck and the Bank’s base rate was close to zero, according to Unite’s analysis of bank profits made in the second half of 2022.
As a result of a tax change included in the chancellor’s budget last week, the largest lenders in the UK are anticipated to gain. A reduction in the government’s surcharge on bank profits from 8% to 3% starting in April will help mitigate a rise in the headline corporation tax rate from 19% to 25%.
As rising interest rates enable them to reap “windfall profits,” campaigners had urged the chancellor to keep the surcharge at the same level. If he had done so, the exchequer might have received more than £1 billion.
As the cost of living crisis for millions of families grew worse, the Unite general secretary, Sharon Graham, expressed that the banks used rate increases as a “license to pick the pockets of householders across Britain.”
She further added: “Unbridled profiteering is taking billions of pounds away from workers and communities and putting it into the hands of corporate Britain. Last year, the profits of the big four banks soared to an eye-watering £33 billion. Politicians need to wake up. It’s only by taking on runway profiteering that we can end the cost of living crisis.”
- Published By Team Timeswire