Banks expect tax rise in Healey's 28 October budget, Guardian and BBC report

Left · 1The Guardian reported on 15 October, citing its own understanding of government thinking, that Chancellor John Healey is poised to tax Britain's banks in the 28 October budget to help offset the damage the Middle East war has done to the public finances. 1 Centre · 1The BBC reported the same day that senior banking executives expect the sector to be "on the menu" in the budget, and that Healey has described banks as part of "the crown jewels" of the UK economy but has refused to rule out a raid on the sector. 2 Mixed · 2The leading option is to raise the bank surcharge, which is currently 3% on top of corporation tax. The surcharge was cut from 8% under earlier Conservative chancellors; the Guardian attributes the cut to Jeremy Hunt, while the BBC attributes it to Rishi Sunak. Both estimate that restoring 8% would raise about £2bn a year, and the Guardian cites TUC analysis of £2.25bn. 1 2

Centre · 1The BBC describes a further option discussed with Treasury officials: a moratorium for a few years on banks using past losses to offset profits, estimated to yield about £1bn a year. It says Lloyds in particular has benefited from the current rule, and that a bank executive called the idea "a lot more bearable". The BBC adds that this approach would spare foreign banks such as JP Morgan. 2 Left · 1The Guardian says Healey is also listening to specialist lenders such as Revolut and Shawbrook, which want the profit threshold for the surcharge raised from £100m to £500m, and that the TUC has called for a much higher surcharge of 16%. 1 Mixed · 2Supporters of higher taxes point to bank profits. The BBC says the four biggest banks made around £15bn in the first half of this year. The Guardian says HSBC, NatWest, Barclays and Lloyds made £200bn in pre-tax profits over five years, and quotes TUC general secretary Paul Nowak saying the big four are "making a billion pounds a week" and should "pay their fair share". 2 1

Mixed · 2Banks and their allies oppose a rise. UK Finance told the BBC that further increases would "weaken competitiveness, discourage investment and job creation". The Guardian says UK Finance and TheCityUK wrote to Healey after bank bosses met the chancellor last week and were given no reassurance. It adds that JP Morgan's Jamie Dimon had warned he could scrap plans for a £3bn London headquarters. The Guardian also says industry sources are now resigned to a surcharge rise. 2 1 Centre · 1The BBC gives context on what banks pay now: a levy of 0.1% on short-term and 0.05% on longer-dated loans, which raised £1.4bn last year, plus the surcharge, which raised £1.2bn. It says the sector contributed nearly £40bn to the Treasury last year if employee income tax is counted. 2 Left · 1The Guardian places the move in a wider fiscal squeeze. Borrowing costs have risen as bond markets price in higher inflation from the Middle East conflict, which analysts say could as much as halve the £24bn of headroom Rachel Reeves left in March. Healey, who spoke in Bangkok where the IMF urged the UK to "stay the course", is said to accept narrower headroom but wants to show commitment to deficit reduction. Healey said the budget should give "breathing space" to consumers and businesses, and that other departments must stay within Reeves's June 2025 spending plans. 1

Left · 1The Conservatives oppose a bank tax rise. Leader Kemi Badenoch said the sector already faces a higher effective tax rate than many other major financial centres, and shadow chancellor Andrew Griffith said a raid would "stifle" growth and that Labour should cut spending instead. 1 Mixed · 2Neither report is based on an announced decision. The Guardian's account rests on what it "understands" and on what Healey is "believed to be minded" to do, and the BBC's rests on what bankers expect. 1 2