CS Venkatakrishnan also calls for government to avoid bank tax hike as Rachel Reeves seeks to plug fiscal hole
The chief executive of Barclays has said the UK government needs to limit pay rises for public sector workers and resist a further “squeeze” on banks with tax increases.
CS Venkatakrishnan said the government needed to look at its own spending levels as the chancellor, Rachel Reeves, seeks ways to address a fiscal hole when she announces her budget in November.
“We need to curb expenditure at the government level,” he told the Financial Times. “We need to find a way to curb wage inflation.”
Venkatakrishnan said that, while the government needed to restrict rising “public sector” wages, the inflationary impact of pay rises was an issue across the UK economy.
While UK wage growth has slowed in recent months it is still running at an annual rate of 5.7% in the public sector, excluding bonuses. Private sector wage growth is running at an average of 4.8%.
Venkatakrishnan also said that the banking sector should not be a target of further taxation. “UK banks are taxed more than banks anywhere else,” he said. “How much more are you going to squeeze this?”
Banks are concerned that the industry’s reliable profits, fuelled by higher interest rates, could make it one of the targets for tax increases as Reeves comes under pressure to raise taxes to address a hole in her fiscal plans.
Last month, UK bank shares tumbled, cutting the combined market value of some of the biggest companies in the sector by more than £6bn, as fresh calls for a windfall tax on large lenders in the budget spooked investors.
“I hope it’s an extremely low possibility,” said Venkatakrishnan. “London is a great global financial centre and the path to growth does not lie to taxing the sector even more. I have had the view from day one that this is a government that is pro business and particularly pro the financial industry.”
He claimed the UK banks had, in effect, a total tax rate of about 46% last year, compared with 28% in New York and 29% to 39% in the EU.
Barclays made £5.7bn in pre-tax profits last year in the UK, and paid almost £1.4bn in total tax. Of this, £198m was corporation tax and £154m for the bank levy.
“What I hope and expect is that they will take this time to think through the difficult choices they have to make,” Venkatakrishnan said. “No budget keeps everyone happy, but the object of it is to foster growth in the country.”
Venkatakrishan has been a vocal supporter of Reeves and the wider Labour government’s policies since it took power last summer, but has recently spoken out against proposals to change ringfencing rules that force UK banks to separate their retail and riskier investment banking operations.
Other UK bank bosses, including the Lloyds Banking Group chief executive, Charlie Nunn, said this summer that hiking taxes “wouldn’t be consistent” with the chancellor’s messaging to the City to date.
Nunn said Reeves believed the sector had “huge role to play” in terms of supporting households and businesses, and was cutting regulation and red tape to boost growth. “We definitely believe that’s an important thing to focus on, and obviously, therefore, [it] wouldn’t be consistent with a tax rise,” Nunn said.
Venkatakrishnan’s latest comments echo those he made alongside the release of Barclays’ second quarter results at the end of July, when he told journalists: “On taxation, banks are among the biggest taxpayers in this country. I also think that growth is the primary objective for the UK, and a higher taxation of businesses is not the path towards that growth.”
