Lloyds Banking Group has voiced its support for the Labour government’s upcoming budget, suggesting that any potential tax increases will likely be part of a broader “constructive, pro-growth agenda”.
William Chalmers, the chief financial officer of the UK’s largest mortgage lender, expressed optimism about Labour’s economic approach, which he said could promote growth in critical sectors such as housing, energy, and infrastructure.
Chalmers highlighted that a budget aligned with Labour’s pledges to stimulate investment would be welcomed. “We’re looking for a balanced package,” he explained, adding that a pro-growth strategy would be key to both the bank’s plans and the country’s economic progress.
The bank’s endorsement offers Labour a much-needed boost as it faces opposition from some business sectors over its plans to enhance workers’ rights and raise employer national insurance contributions (NICs). These changes are expected to feature in Chancellor Rachel Reeves’s budget announcement next week.
A Pro-Growth Partnership With Labour
Lloyds has increasingly aligned itself with Labour in recent months, following the party’s efforts to build trust within the business community. Last year, Charlie Nunn, Lloyds’ chief executive, began advising Labour on investment strategies through the British Infrastructure Council, a body recently rebranded as a government task force.
The bank also served as a headline sponsor for Labour’s international investment summit earlier this month, an event aimed at promoting the UK as a destination for global business. Reports suggest that Lloyds invested up to £250,000 in the event, showcasing its commitment to Labour’s growth-focused policies.
Chalmers stressed that Lloyds is prepared to increase its investments in key areas like infrastructure, housing, and energy, should the budget present opportunities. “If the budget affords us opportunities, we’d very much like to continue to invest in those areas,” he said.
Concerns Over Pension Reforms
However, some uncertainty remains regarding potential changes to pension tax relief. Chalmers acknowledged that concerns over these reforms had prompted a modest increase in pension withdrawals among Lloyds customers, who fear potential tax hikes. “We’ve seen a modest increase in pension withdrawal… in anticipation of what might be tax changes in that area,” he noted.
Rumors suggest that Reeves could lower the tax-free threshold for pension withdrawals from £268,275 to £100,000 and potentially introduce a 30% flat rate for pension tax relief. These changes have sparked apprehension among retirees, but Chalmers downplayed the significance, pointing out that the increase in withdrawals comes from a “very low base.”
Stable Performance Amid Uncertainty
Despite these concerns, Lloyds’ financial performance remains steady. The bank reported a 1.8% drop in pre-tax profits for the third quarter, totaling £1.8 billion — a figure that exceeded City expectations of £1.6 billion. While profits dipped slightly, the bank left its annual profit forecasts unchanged.
Lloyds also raised its house price growth forecast for 2024, predicting a 3.5% increase, up from a previous estimate of 1.2%. This suggests optimism about the housing market’s resilience, even amid broader economic challenges.
Looking ahead, Chalmers remains hopeful that Labour’s budget will provide “certainty and clarity” and encourage further investment. “We and everybody else look forward to the certainty that the budget will provide, and hopefully the promotion of growth thereafter,” he concluded.
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