Healey is poised to tax banks harder in the 28 October budget, the Guardian understands
John Healey is poised to raise bank taxes in his 28 October budget, the Guardian understands, with one option worth upwards of £2bn a year. The proceeds would help cover higher borrowing costs from the Middle East war, and the banks have already warned in writing that they could move staff and business abroad.
The Board Room · Leadership desk
Industry sources expect the bank surcharge to go back to 8% if Hunt's cut is reversed, from 3% at present. TUC analysis says an 8% surcharge would raise £2.25bn a year.
| Figure | Value | Note | Claim |
|---|---|---|---|
| Surcharge if Hunt's cut is reversed, per industry sources | 8% | 9 | |
| Bank surcharge at present | 3% | 3 | |
| Raised by an 8% surcharge, per TUC | £2.25bn a year | TUC analysis, as reported by the Guardian | 4 |
What happened
- Industry figures believe the most probable version takes the bank surcharge back to 8% from the 3% banks pay today, on top of corporation tax.
- Analysts say rising borrowing costs could as much as halve the £24bn cushion Rachel Reeves built against Labour's fiscal rules by the March spring forecast.
- Bank chiefs from HSBC, Lloyds, NatWest, Barclays and Santander met Healey last week and were given no reassurance that tax rises had been ruled out.
- Revolut and Shawbrook are lobbying to lift the profit threshold at which the surcharge starts from £100m to £500m, and Healey is listening to representations.
Why it matters
- Who has to decide decision Healey is trading headroom for credibility: he will accept a thinner cushion if bond markets are convinced he is committed to deficit reduction, and a bank tax is a visible way to show it.
- Who's exposed exposure JP Morgan's planned London tower is the clearest test of the banks' relocation warning, because Dimon tied it to the government turning hostile.
- What it limits constraint Other departments are held to Reeves's budgets, so a thinner cushion leaves little new money to absorb another rise in borrowing costs.
Next story · Leadership · 9h ago
Reports of an 8% bank surcharge take about 2% off Lloyds and NatWestConfirmed2 publishers
The sums in circulation span a wide range, and the option reported as likeliest sits at the low end. The TUC's analysis puts a return to 8% at £2.25bn a year [4]. The union itself has lobbied for 16%, which it says would raise £24bn over the next four years [12]. That is £6bn a year [20], about 2.7 times the 8% figure [21]. The Guardian's account rests on what it understands and on unnamed industry and government sources [1]. Those industry sources say the sector is resigned to a rise and believe Healey will reverse Hunt's cut but go no further [9].
Against the budget's fiscal cushion, that option is modest. If analysts are right that rising borrowing costs could halve the £24bn cushion [26], £12bn goes [22], and £2.25bn a year would cover about 19% of the loss [23]. The two figures are not measured over the same period, so the comparison is rough. We think the surcharge is as much a signal as a repair. Healey is understood to accept narrower headroom while wanting to convince bond markets he is wedded to deficit reduction [15], and the IMF, which praised the UK's progress, urged him to "stay the course" [19].
The banks' objection is about location as well as profit. UK Finance and TheCityUK wrote to Healey days after the bank chiefs' meeting, saying higher taxes would force them to move staff and business out of the country, on top of "weakening investors confidence and damaging UK attractiveness" [6]. Jamie Dimon, chief executive of JP Morgan, said in May he could scrap plans for a new £3bn London headquarters if the government became hostile towards banks [7]. The tower is to house more than half of the bank's 23,000 UK staff [8]. Reeves weighed a heavier bank tax and rejected it, wary of deterring investment [11].
A return to 8% answers that objection on scale. The four largest lenders made £200bn in pre-tax profit over five years [10], an average of £40bn a year [24]. Even if they paid all £2.25bn, it would be under 6% of that average [25]. We do not know yet whether JP Morgan would count a return to 8% as hostile.
The public positions are far apart. Paul Nowak, the TUC general secretary, said: "It's time to make sure banks pay their fair share." [13] Healey, speaking to journalists in Bangkok, said: "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," [14]
The threshold request is where the revenue goal meets other goals. A higher threshold would, on its face, give up some of the revenue the surcharge is meant to raise, and a government source said Labour was mindful of the UK needing a positive environment for startup banks and the small-business lending they offered [17]. The size of that giveaway is not in the report. Whatever is decided on 28 October [1] fixes the margin the next quarter starts from.
What to watch
- The rate and threshold in the 28 October budget: whether the surcharge returns to 8% and whether the £100m threshold moves.
- The headroom figure published with the budget, set against the £24bn cushion at the March spring forecast.
- Any move by JP Morgan or the lobby groups on relocation after the budget, including the decision on the £3bn London tower.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence50
- Adoption
- Not scored
- Hype gap+12
- Incentives70
- Confidence58
Perspective Coverage
3 publishers- Builder
- Builder 8%
- Operator
- Operator 35%
- Investor
- Investor 57%
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The Guardian understands John Healey is poised to tax Britain's banks in his 28 October budget, to help offset the damage to the public finances from war in the Middle East.
- [2]
One option understood to be under discussion, reversing the bank surcharge cuts made by Jeremy Hunt, would raise upwards of £2bn a year.
- [3]
Industry figures believe the move will most probably mean raising the bank surcharge, paid over and above corporation tax, back to 8% from 3% at present.
- [4]
Reversing Hunt's cut and taking the surcharge back to 8% would raise £2.25bn a year, according to analysis by the Trade Union Congress.
- [5]
UK bosses of lenders including HSBC, Lloyds, NatWest, Barclays and Santander met Healey last week but were given no reassurance that bank tax hikes had been ruled out.
- [6]
Lobby groups including UK Finance and TheCityUK wrote to Healey days after the meeting, saying that on top of 'weakening investors confidence and damaging UK attractiveness', higher taxes would force them to move staff and business out of the country.
- [7]
JP Morgan chief executive Jamie Dimon said in May he could scrap plans for a new £3bn London headquarters if the UK government became hostile towards banks.
- [8]
The planned London tower will house more than half of JP Morgan's 23,000 UK staff.
- [9]
Industry sources say they are resigned to a rise in the surcharge and believe Healey is minded to reverse Hunt's cut, taking it back to 8%, but not go further.
- [10]
The UK's four largest lenders, HSBC, NatWest, Barclays and Lloyds Banking Group, generated £200bn in pre-tax profits over the past five years.
- [11]
Rachel Reeves, Healey's immediate predecessor, considered and rejected taxing banks more heavily, wary of deterring future investment.
- [12]
The TUC has lobbied for an increase in the surcharge to 16%, saying that could raise £24bn in tax revenues over the next four years.
- [13]
Paul Nowak, TUC general secretary, said: "It's time to make sure banks pay their fair share."
- [14]
Healey said: "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,"
- [15]
Healey is understood to be willing to accept a narrower headroom but is also keen to convince bond markets he is wedded to deficit reduction.
- [16]
Healey has been 'listening to representations' from specialist banks including Revolut and Shawbrook that want the profit threshold at which the surcharge kicks in raised from £100m to £500m.
- [17]
One government source said Labour was mindful of the UK needing to offer a positive environment for startup banks and especially the lending they offered to small businesses.
- [18]
There will be little additional funding for other Whitehall departments, which Healey stressed would have to stick to the budgets Reeves set out.
- [19]
The International Monetary Fund has praised the UK's progress towards balancing the books, urging Healey to 'stay the course'.
- [20]
The TUC's 16% proposal equates to £6bn a year.
- [21]
The TUC's 16% proposal would raise about 2.7 times the annual sum from an 8% surcharge.
- [22]
Halving a £24bn cushion removes £12bn.
- [23]
£2.25bn a year is about 19% of a £12bn loss in headroom.
- [24]
The four largest lenders averaged £40bn a year in pre-tax profit over five years.
- [25]
£2.25bn is about 5.6% of the big four's average annual pre-tax profit of £40bn.
- [26]
Analysts have suggested that rising borrowing costs could as much as halve the £24bn cushion Reeves had built up against Labour's fiscal rules at the time of the March spring forecast.
Sources
3 independent publishers whose own reporting we read for this story.
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