London temporarily raises bank tax to fund £100 payments for 20 million households

Households in England will receive a one-off payment of £100 to help cover some of the higher energy costs this winter. The measure will be funded, among other things, by a temporary increase in the tax on banks, announced by Britain’s Labour government.

The payment is expected to reach around 20 million households, particularly low- and middle-income households living in homes they own. The money will be deposited directly into recipients’ bank accounts.

The plan was unveiled as part of the first budget of Prime Minister Andy Burnham’s government. From January, the additional tax rate for banks will double from 3% to 6% for 15 months. The government estimates that this will raise an extra £1.5 billion, approximately €1.8 billion.

Presenting the budget in Parliament, Chancellor of the Exchequer John Healy said banks should help people cope with economic hardship. “In the midst of global financial storms, I am counting on our banks to help fund a little breathing room for British families,” he said.

The tax announcement, which was less severe than banks had expected, was welcomed by financial markets. Shares in several major London-listed institutions, including Barclays and NatWest, rose afterward.

The bank tax was set at 8% in 2016 but was reduced to 3% in 2023.

The package also extends fuel duty cuts until the end of June. In addition, fixed charges on gas bills will be scrapped next year, while the suspension of VAT on electricity, in effect since October, will continue until next summer.

In his speech to Parliament, Healy cited several international developments weighing on the British economy: trade tensions, Russia’s invasion of Ukraine and the war in the Middle East.

With the new budget, the government aims to ease the cost of living for households and support them with rising expenses, while also asking the banking sector to contribute more.