New bank tax will have disproportionate impact on mutuals, say Nationwide boss

The boss of Britain’s biggest customer-owned lenders has claimed that the new banking tax announced by Chancellor George Osborne last month is set to cost it £300 million over the next five years and could curb its lending powers.

Graham Beale, the chief executive of the Nationwide building society, the UK’s second biggest provider of home loans, said the tax cost was the equivalent of the capital required to fund £10 billion worth of lending.

In July, the Chancellor announced that the annual levy banks pay on their balance sheets would be reduced gradually from 0.21 per cent to 0.1 per cent, but that an 8 per cent surcharge on banks’ profits would be introduced.

Mr Beale said that the tax surcharge might benefit major international banks in the UK, but it would have a disproportionate impact on building societies.

Using a statement that accompanied the lender’s quarterly results published today, Mr 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.”

Nationwide paid £28 million in tax under Britain’s existing bank levy in the 2014/15 tax year.

Mr Beale said the new surcharge would see its net tax cost rise to between £90 million and £100 million in the 2016/17 financial year, the first in which the new rules will have a full impact.

He 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 percent for the large mutuals, to acknowledge that we’re different with a different risk profile, it could have been 4 per cent,” he said.

The building society added that in the three months to 30 June, statutory profits rose to £379m from £253m a year earlier.

There was also a 52 percent increase in underlying profit which hit £400 million.