Jeremy Hunt is reportedly set to rule out a tax hike for banks in next week’s autumn fiscal statement, after previously keeping the option on the table.
It has been widely reported the chancellor was considering overturning plans to cut the bank surcharge, to offset a broader hike in Corporation Tax, which sparked concern about the City’s future global competitiveness.
Hunt is looking to raise around £55bn in the autumn fiscal statement next week in a bid to curb government borrowing.
The Financial Times reports Hunt will slash the bank surcharge from 8 to 3 per cent, as originally planned by Rishi Sunak, when Corporation Tax increases to 25 per cent next year for the UK’s most profitable firms.
This will result in banks paying 28 per cent tax on their profits, which is still higher than the current 27 per cent they pay.
A Treasury source said that the rate of the bank surcharge was “still being decided”.
“Banks should continue to make a fair, sustainable tax contribution into the public purse, but we recognise the need to protect international competitiveness,” they added.
“We will continue to consider the balance between generating revenue to fund public services, and protecting the UK’s financial services sector.”
City figures have warned that the UK’s global competitiveness will be dented further post-Brexit if there wasn’t a cut to the bank surcharge.
A report from UK Finance, a City lobby group, last month showed the tax burden was far higher for financial services firms in London than for firms based in New York or Dublin.
A UK Finance spokesperson said: “The government’s decision to increase Corporation Tax, when it was originally planned, included a reduction in the surcharge levied on banks.
“We urge the government to consider the surcharge very carefully and not put at risk the competitiveness of the UK’s banking and finance industry.”
Hunt will raise taxes and cut future real-terms spending in his 17 November autumn statement, with the chancellor looking at proposals to freeze Income Tax thresholds as a part of a stealth tax grab.
He is considering plans to hike Capital Gains Tax and dividends taxes, while also clamping down on non-doms.
The government is looking to slash government borrowing, after Covid and a series of energy price freezes blew out the UK’s debt pile by hundreds of billions.
September’s mini-Budget, which has now been almost entirely reversed, also led to a surge in government borrowing costs as long-term bond yields soared amid a deep sell-off.