Nationwide attacks bank surcharge, accusing George Osborne of targeting building societies

James Nickerson
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Nationwide say the tax surcharge is equivalent to the “capital required to support about £10 billion of lending” (Source: Getty)

Britain’s second largest mortgage lender has said chancellor George Osborne’s new bank tax will cost it £300m over the next five years.

The move by Osborne to replace the bank levy with a surcharge will “disproportionately” hit building societies, Nationwide chief executive has Graham Beale said.

Osborne announced in the July Budget that the annual levy banks pay on their balance sheets will be reduced, with an eight per cent surcharge on banks' profits to be introduced instead.

The introduction of the tax surcharge is equivalent to the “capital required to support about £10bn of lending”, Nationwide said in its first quarter earnings report today.

Read more: Rationale of bank surcharge under fire as IFS think tank blasts George Osborne's 2015 July Budget

Beale said:

The proposed changes to the bank levy and introduction of the tax surcharge on banking companies announced in last month’s Budget may benefit UK headquartered international banks but will have a disproportionate effect on building societies such as Nationwide.

This represents a missed opportunity to support diversity by acknowledging that building societies are different to banks and to recognise the contribution Nationwide and other mutuals make by lending to the UK economy, and the housing market in particular.

The chancellor was under pressure to replace the bank levy with a profit surcharge from banks, most prominently HSBC, as chief executive Stuart Gulliver set out details of HSBC’s review of the location of its headquarters, looking at criteria including taxes, the government’s attitude to finance, and the regulatory environment.

Read more: Chancellor George Osborne defends bank surcharge at Treasury Select Committee grilling

At a Treasury Select Committee meeting where Osborne was questioned over the surcharge, he said:

We want UK to be [an] international location for banks, and if you tax worldwide balance sheets you’re creating incentives that work against that. I think this balance is better – it’s a levy on domestic balance sheets.

Osborne also defended the move against criticism it would hurt challenger banks, saying the UK was lowering corporation tax to one of the lowest rates in the world.

The warning was incorporated into Nationwide’s first quarter results, which showed underlying profits rising 52 per cent to £400m.

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