John Healey poised to boost taxes on banks in price range | Finances 2026
John Healey is poised to tax Britain’s banks in his 28 October price range, to assist offset the injury inflicted on the general public funds by warfare within the Middle East, the Guardian understands.
The chancellor is in Bangkok, the place the International Monetary Fund has praised the UK’s progress in direction of balancing the books, urging him to “keep the course”.
To maintain the Treasury’s deficit discount plans on monitor within the face of rising authorities borrowing prices, the Guardian understands Healey has determined to faucet the monetary sector for added earnings.
One choice understood to be beneath dialogue – reversing cuts to the financial institution surcharge made by Jeremy Hunt – would elevate upwards of £2bn a 12 months.
Lenders have been logging sturdy earnings on the again of rising rates of interest, with the UK’s 4 largest lenders – HSBC, NatWest, Barclays and Lloyds Banking Group – alone having generated £200bn in pre-tax earnings over the previous 5 years.
Thinktanks and commerce unions have repeatedly urged Healey to tax Britain’s banks extra closely, an choice thought-about however rejected by his predecessor Rachel Reeves, who was cautious of deterring future capital allocation.
Paul Nowak, the final secretary of the Trades Union Congress (TUC), mentioned: “Britain’s huge 4 banks are making a billion kilos every week, whereas bonuses have hit a post-crash file. These are bumper earnings, pushed by excessive rates of interest and households’ mortgage distress. It’s time to ensure banks pay their justifiable share.”
Speaking to journalists in Bangkok, Healey praised the banks as essential to supporting financial progress. “People too typically see them as huge, distant monetary establishments, when they’re hardwired into the financial cloth of this nation and our future prospects,” he mentioned.
But he’s however believed to be minded to extend the surcharge banks pay on their earnings, over and above company tax. Industry figures consider that may most likely imply elevating the surcharge again to eight%, from 3% at current.
The UK’s value of borrowing has risen sharply in latest weeks, alongside that of other big economies, as bond bourses have responded to the prospect of upper inflation on account of the Middle East clash.
Analysts have urged that might as a lot as halve the £24bn cushion Reeves had constructed up in opposition to Labour’s fiscal guidelines on the time of the spring forecast in March.
Healey is known to be keen to just accept a narrower “headroom”, however can be eager to persuade bond bourses he’s wedded to deficit discount.
Bank bosses have been lobbying intensively in opposition to tax rises since narrowly escaping larger levies throughout final 12 months’s price range. UK bosses of lenders together with HSBC, Lloyds, NatWest, Barclays and Santander met Healey final week however got no reassurance that financial institution tax hikes had been dominated out.
Their foyer teams – together with UK Finance and TheCityUK – wrote to Healey days later, saying that on high of “weakening traders confidence and damaging UK attractiveness”, larger taxes would pressure them to maneuver workers and industry in another country.
That echoed warnings by the chief govt of JP Morgan, Jamie Dimon, who mentioned in May he may scrap plans for a new £3bn London headquarters if the UK authorities turned hostile in direction of banks. News of the tower – which can home greater than half of the US capital allocation financial institution’s 23,000 UK workers – was got here days after Reeves spared the sector additional tax rises in her 2025 autumn price range.
One trade supply mentioned banks had been resigned to an increase within the surcharge. They consider Healey is minded to reverse Hunt’s reduce – taking it again to eight% – however not go additional. Such a transfer would elevate £2.25bn a 12 months, in keeping with evaluation by the TUC.
Another trade supply mentioned they had been caught off guard by the change in messaging, having come simply hours after Healey hailed banks as a “jewel” in the crown of the British economy. “We’re shocked to see this following earlier feedback which seemed to be extra supportive of the sector.”
When requested about how a lot the banking trade may be capable of take in when it comes to tax rises, the top of coverage at TheCityUK, John Godfrey, mentioned banks “don’t need to get into debating the menu of taxation. The reality is that we don’t need to eat in that restaurant.”
Healey has additionally been “listening to representations” from specialist banks, together with Revolut and Shawbrook, that need the revenue threshold at which the surcharge kicks in to be raised from £100m to £500m.
One authorities supply mentioned Labour was conscious of the UK needing to supply a optimistic setting for startup banks, particularly the lending they provided to small companies.
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The TUC has lobbied for a way more punitive enhance, to 16%, saying that might elevate £24bn in tax revenues over the following 4 years.
Healey mentioned he wished his first price range as chancellor to offer “respiratory area” to each shoppers and companies within the face of rising power costs.
There will likely be little extra funding for different Whitehall departments, nonetheless, which he confused must follow the budgets Reeves set out at her spending overview in June 2025.
“It’s vital that they do handle inside what they’ve obtained, and it’s a part of the job,” Healey mentioned. “You need to reprioritise if you wish to do contemporary issues, or extra.”
The Institute for Fiscal Studies has mentioned Reeves’s plans may lead to real-terms spending cuts for some departments within the later years of the spending overview interval.
The Conservative chief, Kemi Badenoch, used a go to to a monetary providers agency in Edinburgh on Thursday to warning in opposition to additional banking tax rises, saying the sector already confronted a better efficient tax charge than in lots of different huge international monetary centres.
Andrew Griffith, the shadow chancellor, mentioned: “Britain wants progress. But a raid on the monetary providers sector will stifle it. Labour needs to be backing companies and wealth-creators, not making their lives even tougher. Rather than mountain climbing taxes but once more, Labour ought to reduce spending.”
As effectively as an power help bundle for households and companies, Healey’s first price range is anticipated to set out extra particulars of plans to devolve revenue tax to mayoralties, and clarify how the federal government will absolutely fund the four-year defence capital allocation plan introduced by Keir Starmer earlier than he stepped down as prime minister.
Healey is anticipated to duck the longer-term query of when the UK will spend 3% of gross home product on defence, the difficulty over which he resigned as defence secretary in June, contributing to Starmer’s downfall.
