Banks’ £17.8 billion tax cut could have funded pay rise for 150,000 carers

19 Mar 2023

EMBARGO: IMMEDIATE RELEASEBanks’ £17.8 billion tax cut could have funded pay rise for 150,000 carers

The Liberal Democrats are calling on the Chancellor to cancel Conservative tax cuts for big banks and instead give carers a pay rise, after analysis of figures buried in the Budget revealed banks are being handed a tax cut of £17.8 billion over the next five years.

In a speech at the party’s Spring Conference today, Liberal Democrat Treasury Spokesperson Sarah Olney called on the Chancellor to scrap the tax cuts for banks and use the money to fund a pay rise for social care workers instead.

Jeremy Hunt’s Spring Budget confirmed that the planned Bank Surcharge cut from 8% to 3% will go ahead next month (from 1 April). Coming on top of the Government’s previous cuts to the Bank Levy, it means a total giveaway to banks of £17.8 billion over the next five years, Liberal Democrat analysis of the latest OBR forecasts has revealed.

As the NHS crisis continues to spiral out of control, the Liberal Democrats want to see the tax cut cancelled and a £2 an hour pay rise given to carers.

Giving all social care workers a pay rise of £2 an hour would cost Local Authorities - who commission care services - approximately £1bn a year. Liberal Democrats have said that this additional cost should be funded by the central Government, to protect councils’ budgets.

Reversing Conservative tax cuts to the banking sector would raise up to £3.8bn a year, or £17.8bn over the next five years. This would comfortably cover the cost of giving all care workers a pay rise. It would also raise enough money for the Government to cover the equivalent of 150,000 carer salaries at the new higher minimum wage - or 90% of all current vacancies in social care.

Under Liberal Democrat plans, social care workers would be paid at least £2 an hour more than the current minimum wage, bringing their pay up to at least £12.42 from this April. This pay rise for care workers would alleviate pressure on the NHS, cut down waiting times for hospitals and ambulances and fix the broken, understaffed social care system.

There are currently a staggering 165,000 vacancies in social care, up 55,000 since last year, with one in nine frontline care jobs vacant.

Liberal Democrat Treasury Spokesperson Sarah Olney MP said:

“It’s baffling that this Conservative Government is pressing ahead with handing out billions in tax cuts for the big banks, while the NHS is crumbling and families struggle to pay the bills.

“It shows yet again that Rishi Sunak and Jeremy Hunt are staggeringly out of touch and have their priorities totally wrong.

“Fixing our broken social care system needs to be top of the agenda. The Chancellor needs to go back to the drawing board with these plans. This money would be far better spent funding a pay rise for carers and investing in our NHS.”

ENDS

Notes to editor

The Conservatives have cut the Bank Levy every year from 2016 to 2021. The two bank taxes will now raise a combined £2.5 billion in 2023-24, down from £4.7 billion in 2016-17 – a 56% real-terms cut.

Figures analysed by the Liberal Democrats show that in total, banks will pay £17.8 billion less over the next five years than if revenues from the Surcharge and Levy had been maintained at 2016-17 levels in real-terms.

According to the Resolution Foundation, giving all care workers a pay rise of £2/h would cost the Government just under £1bn a year.

The National Living Wage (or minimum wage for over 23s) is due to rise to £10.42 next month, which would have taken the proposed carers’ minimum wage to £12.42. That’s the equivalent of an annual salary of £25,834 for a full time worker working 40 hours a week.

Reversing Conservative tax cuts for big banks would raise £3.8bn by 2027-28, equivalent to 147,095 full time salaries at the carers’ minimum wage.

According to Skills for Care, there are currently 165,000 social care vacancies, 55,000 higher than last year.

Public sector receipts from bank taxes (£bn)
	2016-17	2023-24	2024-25	2025-26	2026-27	2027-28	5yr total
Bank Levy	3.0	1.3	1.3	1.3	1.3	1.3
Bank Surcharge	1.7	1.2	0.9	0.9	0.9	0.9
TOTAL	4.7	2.5	2.2	2.2	2.2	2.2	11.3
GDP Deflator	95.0	115.3	117.1	118.3	119.7	121.6
Total if 2016-17 levels maintained in real terms		5.7	5.8	5.8	5.9	6.0	29.1
Bank Levy		3.6	3.7	3.7	3.8	3.8	18.7
Bank Surcharge		2.0	2.1	2.1	2.1	2.1	10.4

Difference		-3.2	-3.6	-3.6	-3.7	-3.8	-17.8
Real-terms cut since 2016-17		-55.8%	-61.7%	-62.1%	-62.6%	-63.2%	-61.1%