The chief executive of Lloyds Banking Group has warned that a tax raid on the banks could harm lending to households and businesses.

In an exclusive interview with Sky News at the government’s regional investment summit, Charlie Nunn urged the chancellor to ignore calls for a windfall tax on commercial banks even though the sector is enjoying record profits.

“If we are going to have the ability and the confidence to continue to lend into the real economy, to help households and businesses invest, we need to make sure that the financial services system and Lloyds Banking Group really remains healthy in that context,” he said.

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Britain’s four largest banks – HSBC, Barclays, Lloyds Banking Group and NatWest – posted record profits of £45.9bn last year and are on course for another bumper performance this year, thanks to higher interest rates.

Their financial success has raised speculation that the sector could be in the chancellor’s firing line at next month’s budget.

Rachel Reeves could raise the bank surcharge – a levy on bank profits in addition to corporation tax.

The Conservative government cut the levy from 8% to 3% in 2023. Returning it to 8% could raise £2bn for a chancellor who needs to find anywhere up to £50bn to meet her fiscal rules.

Some have suggested a separate windfall tax, which could raise closer to £8bn.

Mr Nunn said such a move risked undermining the health of a sector which underpins the country’s economic prosperity.

“Obviously, taxes are a matter for the government to look at. But it’s definitely one of the factors that impact our ability to support the real economy in the UK,” he said.

A raid on the banks would cause pain to a sector that is already facing substantial costs because of the car finance scandal.

Lloyds, one of the most exposed lenders, has set aside nearly £2bn to cover potential compensation arising from the Financial Conduct Authority’s (FCA) redress scheme.

The FCA established the scheme to draw a line under the long-running mis-selling scandal, in which lenders failed to disclose commission paid to brokers, meaning many customers ended up paying more than they should have for their car finance.

Under the FCA’s scheme, eligible customers – as many as 14.2 million – could receive an average of £700 each.

There is mounting anger within the industry at the way the scheme, which is going out to consultation, has been set up. Mr Nunn said the proposal was too generous to customers and not proportionate to the harms actually caused to customers.

He did not rule out the possibility of a judicial review but, in the first instance, called for a rethink, warning that the current scheme risks scaring away investors, causing an exodus from the market and driving up the cost and availability of credit.

“When you look at the implication of what’s being proposed by the FCA, it’s going to potentially take 20 years of profitability of the car finance industry. And, what does that mean for invest ability in that industry and for other investors and businesses looking to invest in the UK? There’s real concern that this is going to create an invest ability issue,” he said.

“Our concern is will the industry continue to function? Will it support all customers across the whole of the UK that need finance? Will other investors be looking at this and wondering whether the UK is a place they should invest, if retrospectively we can take away 20 years of profits?”

Prince Andrew should give evidence to US authorities, a government minister has said, as anger grows after it emerged he had been paying “peppercorn rent” for two decades.

On Friday, Prince Andrew announced he was giving up his royal titles, including the Duke of York, after new, damaging reports about his relationship with paedophile financier Jeffrey Epstein.

Passages from the memoir released on Tuesday of the late Virginia Giuffre, who accused Prince Andrew of sexually assaulting her, provide further details of their alleged encounters.

Prince Andrew has always strenuously denied the allegations.

Business Secretary Peter Kyle said on Tuesday he would “support” Prince Andrew giving evidence to US prosecutors.

He added he would also support any decision by the Met Police to investigate allegations that Prince Andrew used a Met bodyguard to gain information on Giuffre.

It comes as anger continues to grow over Prince Andrew’s housing arrangements.

‘Peppercorn rent’

The royal has only paid “peppercorn rent” for more than two decades at his Windsor mansion, according to a National Audit Office report published in 2005.

“Peppercorn rent” is a legal term used in leases to show that rent technically exists, so the lease is valid, but it’s nominal, often literally £1 a year or just a symbolic amount.

In practice, it means the tenant pays no rent.

It also shows he was required to pay a further £7.5m for refurbishments.

A document from the Crown Estate also shows he signed a 75-year lease on the property in 2003.

It reveals he paid £1m for the lease and that since then he has paid “one peppercorn” of rent “if demanded” per year.

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The agreement also contains a clause which states the Crown Estate would have to pay Andrew around £558,000 if he gave up the lease.

Pressure is mounting on him to give up the 30-bedroom mansion.

Senior Tory Robert Jenrick called for Prince Andrew to live privately.

‘He has disgraced himself’

He said: “It’s about time Prince Andrew took himself off to live in private and make his own way in life.

“He has disgraced himself, he has embarrassed the royal family time and again. I don’t see why the taxpayer, frankly, should continue to foot the bill at all. The public are sick of him.”

Mr Kyle, however, said that would be a question for King Charles.

But he did say MPs could bring forward a motion to strip Prince Andrew of his remaining titles, adding it would be up to Speaker Sir Lindsay Hoyle to choose one of these motions for debate.

The government is facing increasing pressure to formally strip Prince Andrew of his dukedom.

Andrew voluntarily gave up his titles last week but will technically continue to hold them unless they are removed by an Act of Parliament.

Rachael Maskell – the independent MP for York Central – told Sky News that 88% of her constituents don’t want the duke “to carry a title bearing the name of our city”.

On the Politics Hub With Darren McCaffrey, she confirmed she is advocating for a change in the law, and argued mechanisms should be in place to remove titles.

“My legislation would be able to be applied to anybody in the future as well, so we wouldn’t have this situation ever having to occur again,” Ms Maskell added.

Meanwhile, the Scottish National Party (SNP) has also warned new legislation must be put forward without “any excuses and any further delay”.

The SNP’s Westminster leader Stephen Flynn said: “The public knows this is the right thing to do – and even more importantly, the victims at the heart of the Epstein scandal know that it’s the right thing to do.

“Those implicated in the Epstein scandal have been able to escape justice because they have hidden behind their power and privilege.”

A proposed bill has been put forward that would also strip Lord Mandelson of his peerage – weeks after he was sacked as the UK’s ambassador to the US because of his own ties to the paedophile financier.

Yesterday, the prime minister’s official spokesman said the question of legislation was “a matter for the palace in the first instance” – and Downing Street “supports the judgment of the King” regarding what should happen to Prince Andrew’s titles.

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Accuser’s memoir published today

Pressure has been growing on Andrew amid continued reports of his relationship with Epstein, with the royal “vigorously denying” the allegations against him.

The posthumous memoir of Virginia Giuffre – who had accused him of sexual assault and sued him in August 2021 – is being released today. She took her own life in April.

Amy Wallace, who co-authored Nobody’s Girl, said Ms Giuffre would have regarded Andrew relinquishing his titles as a “victory”.

She told BBC Newsnight: “Virginia wanted all the men who she’d been trafficked to against her will to be held to account and this is just one of the men but … even though he continues to deny it, his life is being eroded because of his past behaviour as it should be.”

The new memoir alleges that Andrew asked a royal close protection officer to “dig up dirt” on Ms Giuffre in 2021.

A Buckingham Palace source told Sky’s royal correspondent Rhiannon Mills these claims are “being viewed with very serious and grave concern” – and “should be investigated in the proper and fullest ways”.

‘Police gaslit my sister’

Meanwhile, Ms Giuffre’s brother and sister-in-law have urged the Independent Office for Police Conduct to review the Met’s decision not to continue its investigations into the allegations she made against Prince Andrew.

Sky and Amanda Roberts told Channel 4 News that Ms Giuffre had been “gaslit” by detectives – as well as British and American authorities – in what amounted to a “kick in the stomach” for her.

In other developments, questions have been raised about whether Andrew should have the right to continue living at the Royal Lodge in Windsor.

Details of the financial arrangements surrounding his 30-bedroom mansion have come to light.

A copy of the leasehold agreement obtained by the PA news agency shows he signed a 75-year lease on the property in 2003 at a cost of £1m.

Since then, he has paid “one peppercorn” of rent “if demanded” per year, a term used to describe a small payment that makes a contract legally binding.