£9bn bank tax: TUC plan to cut bills for two thirds of homes
Britain's trade unions have asked Andy Burnham to knock money off household energy bills through a so called social tariff, and to pay for it with a tax rise on the banks. The TUC wants the bank surcharge, which was cut from 8 per cent to 3 per cent in 2023 by the then Conservative government, put back to where it was. It estimates that reversal would raise £9bn over four years.
A social tariff is a discount on your energy bill worked out from your household income, so that lower and middle earners pay less than the standard rate. The TUC says it believes two thirds of households could benefit. It is a demand rather than an agreed policy, and nothing has been confirmed by the government.
The union body has taken the argument straight to the top. TUC general secretary Paul Nowak said the plan would appeal to the prime minister, describing it as the kind of policy that makes a difference in the real world and that people can see a value in.
Nowak also tied bills to the wider squeeze on wages and prices, saying energy costs are fuelling inflation and that millions of families across the country are worried about turning the heating on this winter. He said next month's Budget needs to show the government is back in the service of the British people.
Households do already have one change coming. Burnham has temporarily scrapped VAT on electricity bills from October, which he calls breathing space on the cost of living. That is a real cut, but it is temporary, and it is separate from the income based discount the TUC is now pushing for.
The banks are not keen. UK Finance, which speaks for the big lenders, argues that heavier levies would undermine the government's ambition of growth in every postcode and would damage the country's international standing, saying UK banks already face a heavier tax burden than those in the United States. Nowak was unconvinced, saying he cannot believe banks would leave over a surcharge going back to its 2023 level, and pointing out that bank share prices have risen faster here than in New York.
The TUC's list does not stop at the banks. Nowak says the tax system is good at taxing income but not good at capturing wealth, and wants Capital Gains Tax brought into line with income tax rates alongside a windfall tax on social media companies. The economist Lord O'Neill, who has advised Burnham, has said wealth taxes are the last thing that should happen if the country wants growth. Nowak replied that those with broader shoulders should pay a fairer share.
The next dates to watch are the TUC's annual congress in Brighton next week, where delegates will debate the union movement's demands, and the Budget next month, when Burnham and the new Chancellor John Healey decide what actually goes ahead. The Liberal Democrats and the Greens in England and Wales have also called for a windfall tax on banks.
For most households the practical position is simple. The only firm help on the table right now is VAT coming off electricity bills from October. The social tariff is a proposal, backed by the unions and, according to Nowak, likely to be popular with Labour MPs, but it has not been costed by the Treasury or written into any rules. If it is going to happen, the Budget is where you will find out.
