Former Chancellor Jeremy Hunt has issued a direct bank tax Budget warning to John Healey, arguing that raising levies on UK lenders would cost jobs and ultimately reduce, not increase, tax revenues. The warning comes days before Healey is due to deliver his BBC-confirmed first Budget on 28 October.
Writing in the Times, Hunt said Healey must ignore the ‘siren voices’ calling for a raid on bank profits. ‘The problem is that capital is mobile,’ he wrote. ‘A more likely outcome would be less investment, lower growth and fewer jobs. Make a mistake on bank taxes and things could easily unravel, generating less not more revenue for the national coffers.’
The Bank Tax Budget Warning From the City
The Godalming and Ash MP is not alone. The bosses of the UK’s biggest lenders met with Healey on Tuesday for a pre-Budget summit. According to Bloomberg, those present included Georges Elhedery of HSBC Holdings, CS Venkatakrishnan of Barclays, Charlie Nunn from Lloyds Banking Group, and Paul Thwaite of NatWest Group. Executives from Nationwide Building Society were also at the table on Tuesday morning, according to Morningstar.
The pre-Budget meeting reflects the intensity of lobbying from the financial sector. JP Morgan boss Jamie Dimon met with Healey last month ahead of the Budget. In a phone call in August, Dimon is understood to have emphasised the importance of ‘getting public policy right’. Dame Jane Fraser, a Scot credited with turning around Wall Street’s Citibank, said she was ‘concerned’ at another charge on banks in Britain. ‘Money votes with its feet,’ Fraser said in August. ‘It’s already one of the most expensive centres in the world.’
UK Finance, the industry body for the banking sector, has also written to Healey. In a letter seen by City AM, the body’s boss, David Postings, wrote: ‘Banking reaches every part of the economy and every region of the country, providing credit to households and SMEs, supporting investment, and acting as the UK’s gateway to global markets.’ He added: ‘The debate needs to recognise both the significant tax contribution already made and the wider economic importance of sustainable profitability.’
The Surcharge History and the Case Against a Hike
Hunt, who served as Chancellor under Liz Truss and Rishi Sunak, cut the UK banking surcharge in April 2023 from eight per cent to three per cent. The surcharge sits on top of corporation tax, setting the effective rate for banks at 28 per cent. Hunt’s argument is that banks have largely settled their debts with taxpayers since the financial crisis bailouts, yet continue to face disproportionately high tax rates relative to European rivals.
He pointed to PwC figures showing total taxes on UK banks amount to 46 per cent of profits, compared with 42 per cent in Amsterdam, 39 per cent in Frankfurt, and 29 per cent in Dublin. On that basis, Hunt contends that the existing burden already puts London at a competitive disadvantage, and that any further increase risks pushing investment elsewhere.
Lobbyists have nonetheless called for the surcharge to be raised. Housing secretary Angela Rayner urged ousted Chancellor Rachel Reeves to hike the charge to five per cent to avoid welfare cuts. Some campaigners have gone further. Activists at Positive Money have suggested a windfall tax on the profits of top lenders could raise £19 billion from NatWest, Lloyds, Barclays and HSBC.
Healey’s Budget on 28 October will settle the question. The chancellor left bank chiefs without a clear answer at Tuesday’s summit, according to Bloomberg, which reported that he told CEOs no decision had yet been made on tax.
