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Nationwide chief criticises bank levy changes as unfair on smaller lenders Nationwide chief criticises bank levy changes as unfair on smaller lenders
(about 11 hours later)
The chief executive of Nationwide has criticised changes to the banking levy announced in the budget, saying that the scale-back will have a “disproportionate effect” on smaller lenders and would cost the customer-owned group £300m over five years.The chief executive of Nationwide has criticised changes to the banking levy announced in the budget, saying that the scale-back will have a “disproportionate effect” on smaller lenders and would cost the customer-owned group £300m over five years.
The UK’s largest building society reported an increase in profit before tax of almost 50% for the first quarter of its financial year – from £253m last year to £379m for the the three months from April and June. The UK’s largest building society reported an increase in pre-tax profit of almost 50% for the first quarter of its financial year – from £253m last year to £379m for the three months from April and June.
Graham Beale said in a results statement that changes to the bank levy announced by the UK’s chancellor, George Osborne, last month failed to recognise the contribution building societies had played in lending.Graham Beale said in a results statement that changes to the bank levy announced by the UK’s chancellor, George Osborne, last month failed to recognise the contribution building societies had played in lending.
Related: Biggest banks welcome budget reduction in bank levyRelated: Biggest banks welcome budget reduction in bank levy
Responding to complaints from banks that the levy has been raised too often and without warning, Osborne set out a timetable of reductions from 0.21% to 0.18% from January 2016 and 0.17% from January 2017, before reaching 0.10% from January 2021.Responding to complaints from banks that the levy has been raised too often and without warning, Osborne set out a timetable of reductions from 0.21% to 0.18% from January 2016 and 0.17% from January 2017, before reaching 0.10% from January 2021.
The levy had been based on global balance sheets, but would from 2021 be focused only on their UK operations. The chancellor’s move to scale back the levy, which has raised £8bn since 2010, came alongside a new 8% surcharge on bank profits. Analysts estimated the changes would save major international banks such as HSBC and Standard Chartered almost £1bn in tax a year.The levy had been based on global balance sheets, but would from 2021 be focused only on their UK operations. The chancellor’s move to scale back the levy, which has raised £8bn since 2010, came alongside a new 8% surcharge on bank profits. Analysts estimated the changes would save major international banks such as HSBC and Standard Chartered almost £1bn in tax a year.
“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,” 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,” Beale said.
“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.”“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 building society said that the impact of the changes to the banking levy and the introduction of a tax surcharge announced in the budget will cost £300m over the next five years. “This is equivalent to the capital required to support about £10bn of lending,” a statement said.The building society said that the impact of the changes to the banking levy and the introduction of a tax surcharge announced in the budget will cost £300m over the next five years. “This is equivalent to the capital required to support about £10bn of lending,” a statement said.
The building society provided more than a quarter of total net lending to the British housing market during the three months, with gross mortgage lending rising by 17% to £6.8bn. Nationwide is the latest lender to hit out at the government’s new banking surcharge, with Yorkshire Building Society and challenger banks such as TSB among those to have criticised the move.
“We continued to lend through the financial crisis – we didn’t take any losses or draw on taxpayers’ money,” Beale said. He stressed the financial impact of the bank tax changes will not impact the group’s ability to lend.
Beale said customer-owned lenders such as Nationwide should be treated differently to banks because they are less of a risk to the British economy.
“Instead of having a surcharge of 8% for the large mutuals, to acknowledge that we’re different with a different risk profile, it could have been 4%,” he said.
Changes to the banking levy came after sustained lobbying from the industry. HSBC’s chief executive, Stuart Gulliver, said in May the £700m it paid towards the bank levy was impeding his efforts to bolster returns to shareholders.
Nationwide provided more than a quarter of total net lending to the British housing market during the first quarter of its financial year, with gross mortgage lending rising by 17% to £6.8bn.
It said its share of the current account market remained at 6.8%, despite benefiting from the new current account switching service, gaining 7.4% of switchers.