Key facts
- Barclays has urged Prime Minister Andy Burnham not to increase bank taxes.
- The City of London is concerned about potential tax raids on the financial services sector.
- A significant increase in the bank surcharge could raise billions for the government.
- Banks argue they already pay substantial taxes and that higher rates could harm London's financial center status.
- The new government faces fiscal pressures and ambitious plans to tackle the cost-of-living crisis.
Britain's financial sector is bracing for a potential tax increase under the new government led by Prime Minister Andy Burnham, who faces significant fiscal deficits and ambitious spending plans. Bankers and industry executives are expressing concern that the Treasury, under Chancellor John Healey, may target the financial services sector for additional revenue, potentially through a hike in the bank surcharge.
The City of London fears a repeat of past battles over bank taxation, especially given the current economic climate and the public's general sentiment towards large banks, which have recently reported bumper profits due to higher interest rates. While the appointment of John Healey and the return of pro-business minister Lucy Rigby initially calmed nerves, the underlying fiscal pressures remain a significant worry.
Industry bodies and bank executives argue that UK banks already bear a heavy tax burden compared to international competitors and that increasing taxes could diminish London's attractiveness as a global financial hub. They emphasize the sector's substantial contribution to tax revenue and the need for a competitive environment to attract investment. The Trades Union Congress, however, has been advocating for a higher bank surcharge, estimating it could generate billions in revenue over four years.
Bankers are also concerned that the new government might not offer the same level of support for the financial sector as the previous administration, particularly with Chancellor Healey potentially focusing more on fiscal matters than financial services reforms. Other potential tax measures, such as a financial transactions tax or changes to how banks are remunerated for reserves at the Bank of England, are also being discussed within the City.