Leader: Carve out mutuals from new bank taxes

Fears are growing that the Government’s new charge on bank profits could prevent billions of pounds in lending.

In July’s Budget, Chancellor George Osborne announced plans to gradually reduce the levy imposed on banks and instead bring in an 8 per cent surcharge on profits from next January.

The surcharge will apply to institutions recording more than £25m in annual profits while the levy will drop from 0.21 per cent to 0.1 per cent by 2021.

The Building Societies Association argues the new levy will unfairly target its largest members because, unlike banks, they are unable to raise capital through methods other than retained profits. It has estimated that the biggest mutuals will be hit with an additional annual tax bill of £126m, which could support as much as £20bn over the next five years.

Go back a couple of years and losing £4bn would have been a big blow to the sector but commentators have described it as “small beer” in today’s larger market.

However, since the financial crisis, mutuals have been known for their innovation and their willingness to operate in more niche areas.

While we do not know for sure that the tax will lead to less lending from the larger societies, the big concern would be if these firms pulled out of areas that catered for more unusual circumstances.

The BSA is in talks with the Government about reforming the levy. Given that building societies cannot issue shares like banks, it may be a good idea to introduce a carve-out for mutuals to ensure they are not more severely hamstrung by the surcharge. Mutuals occupy a vital space in the market so anything that would penalise them would be damaging.

Recommended

Phillips

60 Seconds with… John Phillips, national operations director, Just Mortgages

Having settled into your new role, what plans do you have for Just Mortgages in the next 12 months? We have three objectives: to become a more customer-facing and holistic business; to raise the profile of the brand as hardly anybody knows who we are or of our link to the Spicer Haart group; and […]

Nationwide-Building-Logo-Closeup-700x450.jpg

Nationwide earmarks £1bn for new range of 95% LTV deals

Nationwide is set to launch a range of standard 95 per cent LTV mortgages – its first outside of a scheme since 2008. The range starts at 3.99 per cent and is available through brokers as well as branches. The lender says it has earmarked an additional £1bn in lending for the range over the […]

Mark-Carney-close-up-focused-700.jpg

Carney says China crisis won’t stop UK rate rises

Bank of England governor Mark Carney believes the turmoil in China will not affect the timeline of any UK rate hike. Speaking at a US central banking conference at the end of last month, Carney said that, while the market crash and currency devaluation in China might affect UK inflation, he did not expect them […]

House-Home-Property-Ladder-Mortgage-700x450.jpg

Mortgage rates fall to lowest level on record

Mortgage rates are continuing to fall and are now at their lowest ever level, figures from the Bank of England and FCA show. According to the latest mortgage lenders and administration statistics, the overall average interest rate on gross advances decreased 16 basis points to 2.83 per cent between the first and second quarters. This […]

Thumbnail

Trust me, I’m a provider

By Craig Paterson, Underwriting and Claims Philosophy Manager, Royal London Hard-hitting headlines “Dying mother of two is refused life insurance payout.”1 “What a way to treat a dying man: Grandfather refused life insurance claim.”2 “A widow betrayed by a life insurance company.”3 With headlines like these, it’s no wonder some consumers don’t trust providers. Trust […]

Newsletter

News and expert analysis straight to your inbox

Sign up