UNIONS have called for a “common sense” increase to the bank windfall tax after the Big Four made £13.8 billion in the first quarter of 2026.

The TUC said increasing the surcharge could raise up to £60bn over four years as the latest figures show Barclays, HSBC, Lloyds and Natwest on course to surpass their £45.7bn profits last year.

The union body warned “it’s more vital than ever” that banks play their part in any efforts to protect the economy amid the economic chaos unleashed by US President Donald Trump’s illegal war in Iran.

TUC general secretary Paul Nowak said: “Getting banks to pay more tax on their profits is plain common sense when they’re raking in billions and the rest of the country is struggling to get by.

“After the Tories cut the bank surcharge tax, banks enjoyed a profits bonanza because of high interest rates.

“Now they could be set to make even more if interest rates remain high for longer.

“With Donald Trump’s illegal war abroad unleashing economic chaos at home, it’s only right that banks’ bumper profits are taxed fairly and used to shield households and firms from the damaging impacts of the war.

“The last economic shock caused by Putin’s illegal invasion in Ukraine led to a bumper pay day for banks at the expense of mortgage payers — we can’t allow the same thing to happen again.”

The National Institute of Economic and Social Research (Niesr) think tank warned last week that Britain could face a recession this year with interest rates soaring to 5.25 per cent if the Middle East crisis doesn’t end by 2027. 

Even in the “best case scenario” that the US-Israeli war on Iran ends this year, the energy shock caused by the blockade on the Strait of Hormuz will wipe about £35bn from the economy over the next two years, its latest quarterly economic projections predicted. 

Labour has kept the 3 per cent surcharge on corporation tax for banking company profits above £100 million the Tories had slashed from 8 per cent in 2023.

TUC analysis has shown that implementing the “bare minimum” of reversing the cut would raise between £9bn over the next four years. 

Raising to 15 per cent was estimated to deliver £24bn while a 35 per cent rate - the same as the windfall tax the Tories imposed on energy companies - would raise £60bn over the period.

High interest rates have fuelled excess profits for banks by leading to higher returns both from net interest — the difference on interest charged to borrowers and paid to savers — and interest paid to banks on reserves they hold at the Bank of England.

Sarah Hall, co-executive director of monetary reform group Positive Money, said: “Keeping rates higher for longer will do little to deal with inflation from abroad, but will mean huge transfers from the public to banks, not just through their own increased borrowing costs, but from the higher interest the central bank pays to banks — a cost ultimately borne by the Treasury to the tune of £20bn a year.

“If the government wants to take action on borrowing costs, it should recoup payouts to banks with a windfall tax on the record profits they have made without lifting a finger.

“This is a hugely popular policy which would go a long way towards showing frustrated voters that the government is willing to put their interests above those of big corporations like banks.”

A Momentum spokesperson said: “Bankers are rolling in money, while 14 million UK households live with food insecurity. 

“We need a fundamental transformation of the economy, including a windfall tax increase on banks’ soaring profits. If this Labour government really stood on the side of everyday people, it would take action.”

Two in three people back a windfall tax on banks, according to TUC polling. This rises to 83 per cent among Conservative-to-Labour switchers in the 2024 general election and 73 per cent among Labour voters from the 2024 election now leaning to Reform.

The Treasury was contacted for comment.