Healey set to raise bank taxes in 28 October budget
The chancellor plans to tap the financial sector to repair public finances, with reversing cuts to the bank surcharge among the options under discussion.
At a glance
- Chancellor John Healey is set to tax UK banks in his 28 October budget, the Guardian reports.
- Reversing Jeremy Hunt's cuts to the bank surcharge is one option under discussion and could raise over £2bn a year.
- UK Finance and the CBI warn that further bank taxes would weaken competitiveness and discourage investment.
UK chancellor John Healey is poised to raise taxes on Britain's banks in his 28 October budget, as he looks to repair damage to the public finances caused by war in the Middle East, the Guardian reports.
One option understood to be under discussion is reversing cuts to the bank surcharge made by Jeremy Hunt. That measure alone would raise upwards of £2bn a year. Industry figures believe it would mean the surcharge returning to 8%, from 3% at present, to help rebuild the government's fiscal headroom, which has been eroded by a jump in borrowing costs this year.
Healey praised banks days before
News of the planned tax rise emerged hours after Healey described banks as central to economic growth, telling reporters that 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".
Industry pushback
The banking trade body UK Finance warned that "further increases in bank taxes would weaken competitiveness, discourage investment and job creation, and work against the government's ambition to deliver growth in every postcode". Senior banking executives told the BBC they expect the sector to be "on the menu" at the budget.
The Confederation of British Industry urged Healey to avoid "further sector-specific taxation". Its chief economist, Louise Hellem, said financial services were vital to investment, innovation and growth, and that the sector already faced a higher tax rate than competing international financial centres.
Bailey and Warsh speak in Bangkok
Speaking in Bangkok at the Institute of International Finance annual members' meeting, Bank of England governor Andrew Bailey said evidence of "second round effects" — inflation spreading beyond the energy sector — remained limited. "I think it's too early, but to the extent we've seen evidence, so far it's been quite subdued," he said, with the Bank's monetary policy committee due to set interest rates in three weeks.
Federal Reserve chairman Kevin Warsh, in a fireside chat with IMF managing director Kristalina Georgieva, described AI — using Donald Trump's preferred term, "Super Intelligence" — as probably the most consequential change to the US and global economy in his lifetime, driving a "massive investment surge". He said it should eventually lift productivity, but warned the path there would be "very bumpy", and declined to give forward guidance on interest rates.
Source: The Guardian Business.
Questions and answers
- Will UK banks be taxed more in the October budget?
- The Guardian reports that chancellor John Healey is poised to raise taxes on Britain's banks in his 28 October budget, with the bank surcharge among the options under discussion.
- What is the bank surcharge and could it rise to 8%?
- The surcharge is a levy on bank profits. Industry figures believe cuts made by Jeremy Hunt could be reversed, taking it from 3% back to 8% and raising upwards of £2bn a year.
- What have banks and business groups said about the plan?
- UK Finance said further increases in bank taxes would weaken competitiveness and discourage investment and job creation, while the CBI urged the chancellor to avoid further sector-specific taxation.
