UK Bank Shares Fall on Proposed Windfall Tax by IPPR

UK bank shares fell sharply following a proposal by the Institute for Public Policy Research (IPPR) to impose a windfall tax on banks' profits, aiming to help Chancellor Rachel Reeves address the government's fiscal deficit. The IPPR report highlighted that the Bank of England is currently incurring significant losses, estimated at £22 billion annually due to quantitative easing (QE) and rising interest rates, costs which are ultimately borne by taxpayers and partly funneled to bank shareholders. The think tank recommended a 'QE reserves income levy' targeting domestic and foreign banks with assets over £25 billion, potentially raising £7 to £8 billion annually, along with slowing the pace of bond sales to save over £12 billion per year. Major UK banks including NatWest, Lloyds, Barclays, HSBC, and Standard Chartered saw their share prices decline significantly in response to the tax proposal. The IPPR argued the levy would recover public funds lost through current policies and provide additional fiscal headroom to support households and economic growth amid ongoing cost-of-living pressures. This proposal has stirred market concerns ahead of the autumn budget, reflecting tensions between fiscal policy and financial sector interests.