Full Breakdown
John Healey’s Budget Push to Tax Britain’s Banks
By Drooid · · How we work
Core Event – Proposed Bank Tax Increase Ahead of the October 28 Budget
Chancellor John Healey is preparing to reverse the 2023 cut to the banking surcharge – the levy added to corporation tax on bank profits. Announced in the budget on October 28, the change would raise roughly £2 billion a year, according to trade-union calculations, to help narrow a fiscal gap widened by higher borrowing costs and global shocks.
Background & Context
The surcharge was cut from 8 % to 3 % by former Conservative chancellor Jeremy Hunt in 2023. Labour’s fiscal strategy faces a high tax-to-GDP ratio – the IMF estimates Britain’s taxes are about 40 % of GDP, historically high for the UK. At the IMF’s Bangkok meetings, deputy director Helge Berger warned that further revenue-raising should focus on spending cuts, property-tax reform and better targeting of benefits rather than new bank taxes.
Data & Statistics
- The four largest UK lenders – HSBC, NatWest, Barclays and Lloyds – reported £29.2 billion in pre-tax profit in the first half of the year, with £13.7 billion paid to shareholders.
- Over the past five years the same banks have generated £200 billion in pre-tax profit.
- Paul Nowak, TUC general secretary, estimates that restoring the surcharge to its pre-cut level would raise £2.25 billion annually; a 16 % surcharge could generate £24 billion over four years.
- David Postings, chief executive of UK Finance, warned that reversing the surcharge could lower real-term UK GDP by £1.2 billion by 2029-30 and cut business-loan issuance by £10.4 billion over the same period.
Official Statements & Responses
- The Treasury highlighted modernising property tax and broadening VAT as preferable options and said any new spending must fit within existing fiscal limits.
- Paul Nowak (TUC) argued that the Treasury has already lost £6 billion in revenue from the 2023 cut and that banks’ “bumper profits” justify a tax hike.
Conflicting Reports & Gaps
- Revenue estimates vary: the TUC cites £2.25 billion per year, the IPPR suggests a £1 billion windfall surcharge, while some City analysts warn that a full return to 8 % could depress GDP and lending.
- Proposals differ on the surcharge level: the Guardian reports a possible reversal to 8 %, City AM notes discussion of a modest rise to 5 %, and the TUC pushes for a 16 % rate. No definitive figure has been confirmed.
What’s Next – Budget on October 28
Healey is expected to present the budget on October 28, where the final decision on the banking surcharge will be made. The IMF’s Bangkok meeting, where Healey delivered remarks, underscores international scrutiny of Britain’s fiscal path. Stakeholders from trade unions, think tanks and City groups will be watching closely for the exact tax measure and its projected impact on the fiscal buffer and economic competitiveness.