Chancellor John Healey is planning to hike taxes on bank profits in his Budget, according to reports. The Chancellor is eyeing up measures to repair Britain's struggling finances ahead of his first Budget on October 28. He has faced pressure from the Trades Union Congress (TUC) and think tanks to slap taxes on Britain's "big four" banks, with the public also backing the measure.
Strongest hint yet
Speaking to reporters from the International Monetary Fund meeting in Bangkok, Mr Healey gave his strongest hint yet he was poised to tax the banks. "My observations on the banks are just 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," he said. "That said, I've got decisions to take in the Budget, and I'll set those out in two weeks' time."
Mr Healey is facing difficult decisions in the crunch Budget, with his options limited by Labour's 2024 manifesto pledge not to raise income tax, VAT or national insurance. Global events including the war in Iran has damaged the UK's public finances.
Pressure from the TUC
He is said to be considering reversing former Tory chancellor Jeremy Hunt's reduction in the surcharge banks pay on their profits from 8% to 3%, the Guardian reported. TUC chief Paul Nowak has been applying pressure on the Treasury to press ahead with the hiking taxes on banks to ensure banks pay their "fair share".
Last month, the TUC published new polling showing 68% of voters support cutting energy bills with a tax on banks' profits. Britain's 'big four' banks - HSBC, Lloyds Banking Group, Barclays and NatWest - announced over the summer combined half-year pre-tax profits jumped to more than £29billion. Their estimated annual haul is £55.3bn, equal to about £1,750 a second.
Mr Nowak said on Thursday: "Britain's big four banks are making a billion pounds a week, while bonuses have hit a post-crash record. These are bumper profits – driven by high interest rates and households' mortgage misery. The Treasury has already lost £6billion in revenue from the Tories' senseless bank tax cut – now it's time to make sure banks pay their fair share."
Think tank proposals and warnings
The TUC called for an even bigger surcharge increase, to 16%, saying that could raise £24billion in tax revenues over four years. Trade unions and think tanks have repeatedly lobbied for heavier taxation for banks. The Institute for Public Policy Research this week recommended generating £1billion from a temporary surcharge on commercial banks' windfall profits among a package of measures to raise an extra £16billion to help struggling households.
The think tank, which has been influential in Labour policy-making, said the proposals would help rebuild the Chancellor's fiscal buffer which it estimated has dropped by up to £15 billion since the spring. But the Conservatives and City groups have warned that targeting banks would stifle investment and damage Britain's competitiveness as a financial centre.
Louise Hellem, chief economist at the Confederation of British Industry, said: "The autumn Budget should set the agenda for a competitive and predictable environment that turns those reforms into tangible progress, unlocking domestic investment, deepening UK capital markets and helping more firms to scale and grow. It should also avoid measures that would undermine competitiveness or weaken incentives to invest. With the business tax contribution already at a record share of receipts, that means avoiding further sector-specific taxation, including on a banking sector already facing a higher tax rate than competing international financial centres."
A Treasury spokesperson said: "As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals."
