City chiefs warn Healey bank tax hike could drive businesses out of UK
Top finance industry chiefs have warned the Chancellor that hiking taxes on the banking sector in the forthcoming Budget could drive businesses and capital out of the UK.
Bosses of the City’s biggest industry bodies – including UK Finance, TheCityUK and the CBI – have written to John Healey calling for him to avoid raising the tax rate on banks.
“Tax decisions should be assessed not simply by the revenue they are expected to raise in the short-term, but by their effects on investment, competitiveness and the capacity of firms to support households and businesses,” the group of City grandees said.
Healey met the top bosses of Britain’s biggest banks this week as speculation ramps up the industry will be used for a quick cash raid as Healey looks to rebuild his fiscal headroom that has been shattered by the Iran war.
Economists have forecast that the £23.6bn in headroom left by former Rachel Reeves in the Spring Statement could have been slashed in half as a result of higher borrowing costs following the US-Iran war.
Meanwhile, a number of top banks have upgraded their income forecast for the year on the expectation interest rates will remain higher for longer.
The bosses warned Healey that banks already face an outsized tax rate when compared with competitors overseas. Figures from PwC 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.
Give banks same certainty other sectors get, say City chiefs
Banks in the UK are subject to a sector-specific surcharge of three per cent that sits on top of corporation tax. Some have suggested the surcharge could be returned to eight per cent as a way to raise revenue from banks, but other lobbyists have called for Healey to go further with a windfall tax.
The cohort of City bosses warned “a higher tax burden may not necessarily generate higher tax receipts if capital, people and businesses move elsewhere”.
Signatories include TheCityUK boss Miles Celic, City Of London Corporation’s Chris Hayward, UK Finance’s David Postings, the CBI’s Rain Newton-Smith and AFME’s Adam Farkas.
Former Chancellor Jeremy Hunt – who reduced the surcharge in 2023 – issued a similar waring this week that a “likely outcome” of increased bank taxes “would be less investment, lower growth and fewer jobs”.
Top banking figures have been on the defensive in recent months 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.
In the letter to Healey, the City chief urged the government to “provide our industry with the same certainty already offered to other sectors through the Corporate Tax Roadmap by making a similar commitment to not increase the bank levy or surcharge nor impose any new bank taxes.”
They added higher taxes “could reduce the availability of finance and protection for households and businesses, and risk undermining the growth that both you and the Prime Minister have rightly identified as the key to the country’s long-term success.”