Raising bank taxes will reduce jobs, former Chancellor Hunt warns Healey
Former Chancellor Jeremy Hunt has issued John Healey a major warning over any increase to the level of taxes paid by UK banks ahead of the forthcoming Budget.
The top Tory MP, who has sat on the back benches since Labour came to power in 2024, said Healey must ignore the “siren voices” calling for a raid on banks or risk damaging economic prospects.
Writing in the Times, he said: “The problem is that capital is mobile… 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.”
Hunt, who serves as Chancellor under Liz Truss and Rishi Sunak, slashed the UK banking surcharge in April 2023 to three per cent from eight per cent. The charge sits on top of corporation tax, effectively setting banks rate at 28 per cent.
Lobbyists have called for the sector-specific levy to be raised in a bid to raise strum up cash at the Budget. Housing secretary Angela Rayner urged ousted Chancellor Rachel Reeves to hike the charge to five per cent last year to avoid welfare cuts.
However, some campaigners have gone further and called for a windfall tax on the profits of top lenders. Activists at Positive Money have suggested a windfall tax could raise £19bn from Natwest, Lloyds, Barclays and HSBC.
UK banks face outsized tax rate
Hunt argued banks have largely repaid their debts following taxpayers bailing them out in the financial crisis but were still paying outsized rates stemming from the decades ago.
He pointed to PwC figures that show total taxes on UK banks amount to 46 per cent of profits, compared to 42 percent in Amsterdam, 39 per cent in Frankfurt, 29 per cent in Dublin and 28 per cent in Dublin.
The Godalming and Ash MP joins a chorus of warnings from the City ahead of the Budget. JP Morgan boss Jamie Dimon met with John Healey last month ahead of the Chancellor’s first Budget.
In a phone call in August, the American banker is understood 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… It’s already one of the most expensive centres in the world,” Fraser said in August.
The bosses of the UK’s top lenders are set to meet with Healey for a pre-Budget summit on Tuesday.
UK Finance, the industry body for the banking sector, has written to Healey warning over the consequences of targeting the industry.
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.”