Healey is Plotting Banks Say Tax Raid on their Profits Budget
Senior banking executives have told the BBC that the sector will be “on the menu” when the chancellor unveils his Budget in a fortnight. John Healey said the banks were “the crown jewels of the UK economy, but he refused to rule out a raid on the sector.
Trade unions and others are calling for higher taxes after the country’s four biggest banks made roughly £15bn in profit in the first six months of this year.
But the banking sector trade association UK Finance warned that “further increases in bank taxes would weaken competitiveness, discourage investment and job creation and work against the government’s ambition to deliver growth in every postcode”.Rishi Sunak hiked corporation tax from 19% to 25%, but cut the 3% surcharge from 8%. The surcharge may be raised back to its original level, raising roughly £2bn a year.
The bank levy is now set at 0.1% on outstanding short-term loans and 0.05% on longer-dated loans however mortgages are not subject to the fee.
Previously, banks have successfully argued that higher taxes would risk making the UK uncompetitive with other jurisdictions and would reduce their ability to lend, and therefore be anti-growth.
Banks were, in fact, pleasantly surprised last Budget not to be hammered, given the massive profits they have been making in recent years. Thanks to higher interest rates, the gap between the rates they lend to clients and the rates they pay savers has widened.
Officials at the Treasury have also examined another alternative. Currently, banks can offset profits against losses from previous years, lowering their tax payments in any given year. Lloyds in particular has benefited from this arrangement, using substantial losses from the financial crisis to reduce its tax obligations.
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