Lib Dems call for windfall tax on big banks to fund public services and create Energy Security Bank that cuts bills

EMBARGO: Immediate Release

In her keynote speech to Liberal Democrat Autumn Conference, party Treasury spokesperson Daisy Cooper will call for a targeted windfall tax on the big banks to raise around £7 billion a year on average by the end of the decade that can be poured back into public services and create an Energy Security Bank that will help cut people’s energy bills.

The bank windfall tax policy was originally proposed by the Institute for Public Policy Research (IPPR), whose research laid bare how big banks have seen billions in excess profits due to high interest rates, as an unintended consequence of the Quantitative Easing programme. The proposed tax would be time-limited and narrowly targeted at the unexpected interest payments received by the big banks due to Quantitative Easing, and would not require the Bank of England to make any changes.

Cooper will say that the banks “never expected to receive this windfall; they never relied on this windfall; and never took on any risk to reap this windfall” all whilst making “eye-watering profits” at the expense of the taxpayer. The party also pointed out that banking sector profits nearly doubled in recent years, from less than £25bn in 2019, to almost £50bn in 2025, according to the latest forecasts.

Daisy Cooper will add that it is right that some of the unexpected windfall payments are returned to taxpayers, to help fix our broken public services and ease the cost of living crisis. One of the policies she will call for, is a new ‘Energy Security Bank’ that could cut energy bills for a typical household by around £500 a year.

It would use a one-off initial £2 billion in capital, raised through the bank windfall tax, to create affordable loans of up to £20,000 for homeowners and £50,000 for small businesses and community energy groups, enabling them to invest in things like solar panels and insulation to bring energy bills down by hundreds of pounds annually. Cooper will say that while taxing banks on the windfall caused by Quantitative Easing, a partnership would be forged with the banking sector to expand affordable lending.

The Liberal Democrat Treasury spokesperson will add that the other tens of billions that would be raised across the Parliament through the windfall tax could then be poured back into public services.

Daisy Cooper will also challenge Nigel Farage saying that his “climate myths” must be called out. She will also criticise all those who have “left us at the mercy of global gas markets”.

She will add that the Liberal Democrats will “embrace our responsibility to push back against this rising tide of populism”.

On the big bank windfall tax, Daisy Cooper MP will say:

“Conference, you will remember that we were the first party to call for a windfall tax on the big oil and gas giants when they made profits they weren’t expecting due to Putin’s illegal and full invasion of Ukraine. Well now the big banks are making similar windfall profits too.

“We taxpayers are now shelling out billions of pounds to the shareholders of the big banks - simply because interest rates have remained so high for so long. Banks never expected to receive this windfall; they never relied on this windfall; and never took on any risk to reap this windfall.

“By taxing just the windfall interest payments big banks receive at the taxpayer’s expense, we can fund our public services in a fair way, while fully respecting the Bank of England’s independence and safeguarding our country’s economic prosperity.”

On the Energy Security Bank, Daisy Cooper MP will say:

“Today, I am calling for the creation of a new Energy Security Bank: a bank that could unleash up to £10 billion of affordable loans to homeowners to invest in their energy security and bring energy bills down - permanently.

“With loans of up to £20,000 for households and £50,000 for community energy groups and SMEs, households and small businesses would finally see change - in their homes, on their high streets, and in their bank balances.

“In the long-term, all of these loans should pay for themselves. But for banks to offer a lower interest rate, the Government would need to guarantee them by putting around £2 billion aside.”

On growing the economy and tackling the cost of living crisis, Daisy Cooper MP will say:

“To grow our economy, to tackle the cost of living and the cost of doing businesses, we must aggressively drive down core costs and empower those people who want to do the right thing.

“Our plan for an Energy Security Bank will deliver investment in the real economy - investment that will generate growth, create jobs and provide countless households and small businesses with energy security.” 

On the Energy Security Bank being used to roll out renewables projects in every major town, Daisy Cooper MP will say:

“Our Energy Security Bank would not just help households and small businesses, our Energy Security Bank would have a lending scheme dedicated to accelerating the roll out of solar panels in large supermarket car parks too.

“Doing this around the UK could produce enough energy to power a city the size of Bristol or Nottingham - every single year - making a huge impact on the UK’s path to Net Zero and delivering change in every community: change that people really can see.”

On taking on Nigel Farage, Daisy Cooper MP will say:

“Conference - we must call out Farage who falsely claims that renewables drive up prices - when it’s renewables that bring them down.

“We must call out those who peddle climate myths and would have us left at the mercy of global gas markets. We must reject the climate cost doomsters in the Conservatives and Reform UK.

“We must embrace our responsibility to push back against this rising tide of populism, and we must show that when done well, taking climate action and tackling the cost of living can and must go hand in hand.”

ENDS

Notes to Editor:

The bank windfall tax proposed by the Liberal Democrats would only target the “windfall” interest payments received by commercial banks as a result of the QE-related reserves they hold at the Bank of England. Those interest payments to the banking sector are currently funded by the taxpayer.

The tax does not involve any change to the way in which the Bank of England conducts Quantitative Tightening (QT) and the cited revenue figure of around £7bn a year on average by 2029-30 does not assume any change in the pace of QT. The tax would expire when base rate returns to 2%, or when the QT programme concludes.

The tax would specifically target only the “windfall” portion of QE-related interest payments, i.e. the portion above 2%.

The IPPR report cited in the release can be found here.

According to Octopus Energy, for a typical home with medium use, a new heat pump could save up to £369 a year, and for a typical home with high use up to £496 a year.