Lloyds Banking Group has backed the Labour government’s forthcoming budget and played down the impact of any tax increases, which it said would probably be part of a “constructive, pro-growth agenda”.
The chief financial officer of the UK’s biggest mortgage lender, William Chalmers, said he would welcome a budget package that was consistent with government pledges to kickstart growth and investment in areas such as energy, infrastructure and housing.
The bank’s support for Labour’s agenda will come as a boost to the government, as it faces criticism from some employers over plans to increase workers’ rights and employer national insurance contributions in the chancellor Rachel Reeves’s budget next Wednesday.
Chalmers would not be drawn on the impact specific tax proposals could have on Lloyds – including raising NICs, or cancelling stamp duty exemptions.
However, he said: “Whatever the tax changes might be, we believe that they will be pursued in the context of a constructive, pro-growth agenda. And it’s that overall balance that we’re really looking for, and indeed it’s that overall balance, that pro-growth agenda, that we would seek to be a part of going forward.”
Lloyds has been working more closely with Labour in recent months. The party launched a charm offensive in the City in the run-up to July’s general election victory in an attempt to win the confidence of big businesses.
Last year, Lloyds’ chief executive, Charlie Nunn, began advising Labour on the government’s investment plans as part of its British Infrastructure Council, which relaunched last week as a government taskforce. Earlier this month, the bank was a headline sponsor of the government’s international investment summit, which is said to have come with a price tag of up to £250,000.
Chalmers said he expected the budget would provide “certainty and clarity” and open the door for investment. “We believe that it may present opportunities for customers, perhaps for ourselves, to invest further in the growth agenda of the UK. Where might that be? Housing, infrastructure, energy, these types of things. Again, if the budget affords us opportunities, we’d very much like to continue to invest in those.”
However, Chalmers admitted that jitters over Labour’s tax plans had spooked some of its pension customers. “We’ve seen a modest increase in pension withdrawal … in anticipation of what might be tax changes in that area. But … it starts from a very low base, and so any increase that you see itself may be more significant in percentage terms than it is in absolute terms.”
Reeves reportedly could opt to drop the tax-free threshold for pension pot withdrawals to £100,000, from current levels of £268,275. She is also rumoured to have considered a 30% flat rate of tax relief on pension contributions rather than basing relief on the income tax each individual pays.
Reeves is looking to implement £40bn of tax rises and spending cuts a year in her first budget, to help overcome a £22bn shortfall in the public finances, which Labour claims it inherited from the previous, Conservative government.
“We and everybody else look forward to the certainty that the budget will provide, and hopefully the promotion of growth thereafter,” Chalmers said.
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The bank reported a 1.8% drop in third-quarter pre-tax profits to £1.8bn, beating City expectations for profits of £1.6bn.
Lloyds – which owns the Halifax brand and has about 60,000 employees – left its annual profit expectations unchanged despite raising its forecasts for house price growth to 3.1% for 2024, from 1.2% previously.
Interactive Investor’s head of markets, Richard Hunter, said Lloyds kicked off the quarterly reporting season in “unspectacular fashion”. “Overall, these results do not shoot the lights out, but they do provide a large element of comfort that Lloyds continues on its positive direction of travel towards a more streamlined and digital business, underpinned by a healthy financial position,” Hunter said.
“Moves into other income streams such as credit cards and insurance could well bolster its major mortgage revenue, and the group’s confirmation of its year-end targets is proof that the bank remains on track.”