Chancellor John Healey has signaled that higher taxes on banks are likely in the upcoming UK Budget, telling reporters in Bangkok that he has “decisions to take” regarding the financial services sector. Speaking on the sidelines of the annual IMF and World Bank meetings, Healey emphasized that banks are “hard-wired into the economic fabric,” suggesting they should contribute more. The Treasury declined to comment on a Guardian report that Healey is poised to raise bank levies.
Healey is under pressure to reduce the budget deficit without breaching Labour’s pledge not to raise income tax, VAT, or employee national insurance. One option is reversing former Conservative chancellor Jeremy Hunt’s cut to the bank surcharge on corporation tax, from 8% to 3%. The Trades Union Congress estimates that cut cost the Treasury £6bn and has called for the surcharge to rise to 16%. However, bankers argue the reduction came alongside a corporate tax increase from 20% to 25%.
Despite record profits, some bank executives privately concede that opposing higher taxes is difficult. “It’s tough to argue against it when we are all making so much money,” one said. UK Finance, the trade body, insists London banks already pay higher tax rates than those in New York or Frankfurt. Conservative leader Kemi Badenoch and shadow chancellor Andrew Griffith warned that higher bank taxes would harm growth and competitiveness.
Last week, Healey met with executives from Lloyds, NatWest, Santander, HSBC, and Nationwide, who cautioned that increased taxes would raise capital costs for businesses, reduce lending, and increase mortgage and SME prices.
Source: Financial Times Companies · Summarized by HeadlinesBriefing