Key facts
- UK Chancellor John Healey is considering new windfall taxes on banks and oil companies.
- The proposed taxes aim to increase government revenue by approximately £4.7 billion over four years.
- These funds are intended to support defence spending and fill a partially eroded fiscal buffer.
- Industry leaders, including Citigroup's CEO, have expressed concerns about potential new banking taxes.
- Public sector pay rises, such as a 3.6% increase for Avanti train drivers, add to fiscal pressures.
UK Chancellor John Healey is reportedly facing pressure to implement new taxes on banks and oil companies, as suggested by Treasury officials who view these as potential sources of revenue. This comes amid a need to rebuild the nation's fiscal buffer, which has reportedly shrunk to as low as £8 billion, and to fund defence spending pledges and address the cost of living.
Bosses in the banking and oil sectors have posted significant profits, making them targets for potential windfall taxes. However, industry leaders are already voicing concerns. Citigroup CEO Dame Jane Fraser has cautioned Healey against a new banking tax, and UK Finance has written to the Chancellor highlighting the risks to the financial services sector.
Healey is tasked with finding an additional £4.7 billion over four years to fund a defence investment plan, alongside potential cuts of £10 billion across government departments. Public sector pay demands are also adding to the fiscal squeeze, with reports of a 3.6% pay rise agreed for Avanti train drivers and a potential 12% increase over four years for LNER drivers.
City economists anticipate that the upcoming Budget on October 28 will largely maintain continuity with the previous government's economic policies, avoiding significant expansions in public spending or further borrowing. The government has also deferred a decision on increasing defence spending to 3% of GDP until a spending review next year. Barclays economist Jack Meaning suggested that Healey would likely focus on reallocating existing budgets across departments.