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Banks Warn Healey May Raid Profits in Upcoming Budget
Confirmed
In Short: Senior banking executives warn that UK Chancellor John Healey may impose additional taxes on the banking sector during his upcoming Budget announcement.
Senior banking executives have warned that UK Chancellor John Healey may impose additional taxes on the banking sector during his upcoming Budget announcement, according to the BBC.
The four largest banks in the UK collectively made around £15 billion in profit in the first six months of this year, leading to calls from trade unions and others for additional taxes on the sector.
The current bank levy charges 0.1% on outstanding short-term loans and 0.05% on longer-dated loans, excluding mortgages from the calculation.
The UK's biggest banks and building societies currently pay a surcharge of 3% on top of the baseline 25% rate of corporation tax, plus a levy on the assets held on their balance sheets.
The bank levy generated £1.4 billion last year and the surcharge a further £1.2 billion.
UK Finance, the banking sector trade body, warned that further increases in bank taxes could weaken competitiveness, discourage investment and job creation, and work against the government's ambition to deliver growth in every postcode.
John Healey has described the banks as part of “the crown jewels” of the UK economy, yet has refused to rule out a raid on the sector.
In the past, banks have successfully argued that higher taxes would risk making the UK uncompetitive with other jurisdictions and would reduce their ability to lend, and therefore be anti-growth.
The Guardian reported that Healey has decided to tap the financial sector for additional revenue to keep the Treasury’s deficit reduction plans on track.
Thinktanks and trade unions have repeatedly urged Healey to tax Britain’s banks more heavily, an option considered but rejected by his predecessor Rachel Reeves.
UK bosses of lenders including HSBC, Lloyds, NatWest, Barclays, and Santander met Healey last week but were given no reassurance that bank tax hikes had been ruled out.
Healey is understood to be considering how he can extend business rates relief to other small businesses such as café owners, hairdressers, and florists at his Budget next month.
What this adds
The Guardian reports that Healey's decision to consider additional taxes on banks is part of a broader strategy to drive down the cost of doing business to boost growth.
What's confirmed
- Senior banking executives have warned that UK Chancellor John Healey may impose additional taxes on the banking sector during his upcoming Budget announcement, according to the BBC.
- The four largest banks in the UK collectively made around £15 billion in profit in the first six months of this year, leading to calls from trade unions and others for additional taxes on the sector.
- The current bank levy charges 0.1% on outstanding short-term loans and 0.05% on longer-dated loans, excluding mortgages from the calculation.
- The UK's biggest banks and building societies currently pay a surcharge of 3% on top of the baseline 25% rate of corporation tax, plus a levy on the assets held on their balance sheets.
- The bank levy generated £1.4 billion last year and the surcharge a further £1.2 billion.
- UK Finance, the banking sector trade body, warned that further increases in bank taxes could weaken competitiveness, discourage investment and job creation, and work against the government's ambition to deliver growth in every postcode.
- John Healey has described the banks as part of “the crown jewels” of the UK economy, yet has refused to rule out a raid on the sector.
- In the past, banks have successfully argued that higher taxes would risk making the UK uncompetitive with other jurisdictions and would reduce their ability to lend, and therefore be anti-growth.
- The Guardian reported that Healey has decided to tap the financial sector for additional revenue to keep the Treasury’s deficit reduction plans on track.
- Thinktanks and trade unions have repeatedly urged Healey to tax Britain’s banks more heavily, an option considered but rejected by his predecessor Rachel Reeves.
- UK bosses of lenders including HSBC, Lloyds, NatWest, Barclays, and Santander met Healey last week but were given no reassurance that bank tax hikes had been ruled out.
- Healey is understood to be considering how he can extend business rates relief to other small businesses such as café owners, hairdressers, and florists at his Budget next month.
What's still developing
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- Returning the surcharge to its previous level could raise around £2bn a year.
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- That echoed warnings by the chief executive of JP Morgan, Jamie Dimon, who said in May he could scrap plans for a new £3bn London headquarters if the UK government became hostile towards banks.
- “People too often see them as big, distant financial institutions, when they are hardwired into the economic fabric of this country and our future prospects,” he said.
- The chancellor is in Bangkok, where the International Monetary Fund has praised the UK’s progress towards balancing the books, urging him to “stay the course”.
- Their lobby groups – including UK Finance and TheCityUK – wrote to Healey days later, saying that on top of “weakening investors confidence and damaging UK attractiveness”, higher taxes would force them to move staff and business out of the country.
- One government source said Labour was mindful of the UK needing to offer a positive environment for startup banks, especially the lending they offered to small businesses.
- Central to his Budget planning is driving down the cost of doing business to boost growth, mindful of how Labour’s 2024 manifesto committed to replacing the business rates system to level the gap between online giants and high streets.
- More than 800 businesses wrote an open letter to Burnham, as part of the #VATsTheProblem campaign, to warn that without a “fairer tax burden for hospitality” there will be further closures and job losses, and fewer opportunities for young people.
- In lieu, he appears determined to pull as many little levers as possible, to clear what he described as the “thicket” of regulatory brambles.
- “His lobbying against something is pretty bizarre, he just keeps bringing up bank taxes and talking about them whenever he can!” a source said.