TUC Urges Chancellor Healey to Raise Bank Taxes in 28 October Budget
The Trades Union Congress has urged Chancellor John Healey to raise taxes on banks at the Budget on 28 October, calculating that the cut to the bank surcharge has cost the public purse £6bn over three years.
The surcharge is an extra tax banks pay on profits, on top of standard corporation tax. Corporation tax is the main tax businesses pay on profits.
The TUC, which brings together unions with more than 5.3 million members across England and Wales, puts the loss at £2.3bn in 2023-24, £1.7bn in 2024-25 and £2bn in 2025-26, according to analysis reported by The Guardian. The call was fronted by General Secretary Paul Nowak. Healey is the UK chancellor serving under Prime Minister Andy Burnham, and will deliver his first Budget as chancellor on 28 October, as reported by BBC.
The TUC said the surcharge should be raised beyond its pre-2023 level at the 28 October budget. It set out three revenue paths. Reversing the cut, from 3% back to 8%, would raise £9bn over four years. Raising the surcharge to 16% could raise £24bn over the next four years. A 35% surcharge would deliver £60bn over four years.
The surcharge was cut in 2023 from 8% to 3% under Chancellor Rishi Sunak. The stated purpose was to offset a rise in headline UK corporation tax from 19% to 25%. The maths for banks was therefore different from other companies. The government had said in the Autumn Budget and Spending Review 2021 speech that the total corporation tax rate on banks would increase from 27% to 28% in 2023, as set out by GOV.UK.
That decision followed an earlier signal. In the 2021 Budget Speech, the government said the existing 8% surcharge would make the total tax rate for banks too high and that it would review the surcharge, according to GOV.UK. The 2023 cut was the result.
The TUC links the lost revenue to bank profitability. HSBC, NatWest, Barclays and Lloyds Banking Group generated £200bn in pre-tax profits over the past five years. Banks paid the higher headline tax while paying a lower dedicated surcharge.
Healey has other revenue options in view. He is considering extending a mansion tax, a levy on high-value homes, to properties worth more than £1.5 million, down from a current threshold of £2 million, according to Reuters. Pressure runs the other way as well. Jamie Dimon, chief executive of JP Morgan, warned UK leaders against further bank levies during a meeting last month.
Looking at what this means for the 28 October decision, the choice is between competing ideas of competitiveness. One idea favours a lower combined rate to retain mobile capital and head office functions. The other favours collecting more revenue from a sector with very large pre-tax profits, on the grounds that the 2023 offset is no longer justified. Both sides accept that banks have separate rules. They differ on where the combined rate should settle.
In my view, the TUC move is best read as an attempt to widen Healey's choices rather than a forecast of what he will do. A demand to go beyond 8% gives the Treasury a range: full reversal, partial increase, or a much larger levy. The £9bn, £24bn and £60bn figures set out that range in fiscal terms. The Dimon warning sets it out in terms of investor response. Healey must weigh certain near-term receipts against less clear effects on location and lending, with the Budget now less than three weeks away.
