The Guardian understands that Chancellor John Healey plans to increase taxes on Britain's banks in his upcoming budget on 28 October. The move aims to help offset the impact on public finances from war in the Middle East, which has driven up the UK's borrowing costs. The International Monetary Fund has praised the UK's progress towards balancing the books and urged Healey to "stay the course". One option under discussion involves reversing cuts to the bank surcharge made by Jeremy Hunt, which industry sources believe would raise £2.25bn a year, according to Trades Union Congress analysis.
Britain's four largest banks - HSBC, NatWest, Barclays and Lloyds Banking Group - generated £200bn in pre-tax profits over the past five years, according to the source material. Paul Nowak, general secretary of the Trades Union Congress, said the banks were "making a billion pounds a week, while bonuses have hit a post-crash record" and called for them to "pay their fair share". Industry figures believe Healey is minded to raise the surcharge back to 8%, from 3% currently. Specialist banks including Revolut and Shawbrook have lobbied for the profit threshold at which the surcharge kicks in to be raised from £100m to £500m.
Bank bosses have lobbied intensively against tax rises since narrowly avoiding higher levies during last year's budget. Leaders of HSBC, Lloyds, NatWest, Barclays and Santander met Healey last week but received no reassurance that bank tax rises would be ruled out. Their lobby groups wrote to Healey warning that higher taxes would damage investor confidence and force them to move staff and business out of the country. One industry source said banks were resigned to a rise in the surcharge but caught off guard by the change in messaging.
Healey praised banks as "hardwired into the economic fabric" of Britain and crucial to economic growth. The Conservative leader Kemi Badenoch cautioned against further banking tax rises, saying the sector already faced a higher effective tax rate than many other big global financial centres. The Trades Union Congress has lobbied for a more punitive increase to 16%, saying that could raise £24bn in tax revenues over four years. Healey's budget is also expected to include an energy support package and details on devolving income tax to mayoralties.