Britain’s biggest banks are under pressure to pass on higher interest rates to savers after figures showing they have made an extra £7bn by refusing to do so, and as they stand to benefit from a tax cut announced by Jeremy Hunt.
On the day the Bank of England is expected to announce a further rise in interest rates, the Unite trade union said banks had already made billions of pounds in extra profit from the dramatic rise in borrowing costs.
Banks make money by charging higher interest on loans than deposits, using the central bank base rate as the reference point. However, the industry has come under fire from across the political spectrum for passing on the rise to borrowers amid the cost of living crisis at a faster rate than for savers.
Stepping up the pressure on the banking industry on Wednesday, the powerful Treasury committee of MPs said it was writing to the City watchdog, the Financial Conduct Authority, to suggest it should look at the issue.
Harriett Baldwin, the Conservative chair of the committee, said: “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.”
Barclays, HSBC, Lloyds Banking Group and NatWest Group were forced last month to defend rates of less than 1.3% on their easy-access savings accounts, despite the Bank of England base rate rising to 4%.
According to analysis of bank profits made in the second half of 2022 by Unite, the lenders recorded an extra £7bn of net interest income when compared to the same period in 2019, before the Covid pandemic struck, when the Bank’s base rate remained close to zero.
It comes as the UK’s biggest lenders are expected to benefit from a tax change included in the chancellor’s budget last week. From April, the government will reduce a surcharge on bank profits from 8% to 3%, helping to soften an increase in the headline rate of corporation tax from 19% to 25%.
Campaigners had urged the chancellor to retain the surcharge at the same level as rising interest rates help them to rake in “windfall profits”, in a move that could have brought in more than £1bn for the exchequer.
Sharon Graham, the Unite general secretary, said banks treated rate increases as a “licence to pick the pockets of householders across Britain” amid a worsening cost of living crisis for millions of families.
She 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 £33bn. Politicians need to wake up. It’s only by taking on runway profiteering that we can end the cost of living crisis.”
