Healey refuses to rule out bank tax rises ahead of Budget

Chancellor John Healey has refused to rule out higher taxes on banks in the Budget on 28 October.

Senior banking executives told the BBC they expect the sector to be "on the menu" when he sets out his plans in two weeks' time. Mr Healey has described banks as part of "the crown jewels" of the UK economy.

He said he is committed to lowering public borrowing, but declined to give executives from Barclays, HSBC and NatWest guidance on whether they will face tax rises. Some analysts expect the 3% surcharge on bank profits to rise, according to Reuters. Mr Healey is expected to raise taxes in his first Budget to restore fiscal room for manoeuvre.

The discussion follows recent profit figures. The biggest four banks collectively made around £15bn in the first six months of this year. Unions have called for higher taxes on banks following bumper bank profits.

The biggest banks and building societies currently pay an extra 3% tax on profits on top of the baseline 25% rate of corporation tax, the tax paid on company profits. They pay a separate levy, a charge based on assets held on their balance sheets. The sector contributed nearly £40bn to the Treasury last year once income tax paid by employees is included. The levy raised £1.4bn and the surcharge raised a further £1.2bn.

The surcharge was reduced from 8% to 3% under Rishi Sunak when the baseline rate rose from 19% to 25%. Returning it to its previous level could raise around £2bn a year. The levy is charged at 0.1% on outstanding short-term loans and 0.05% on longer-dated loans, with mortgages excluded from the calculation.

One proposal would place a moratorium, a temporary halt, on banks using past losses to reduce tax bills for a few years. Lloyds in particular has used large financial-crisis losses to lower tax bills ever since. The proposal is estimated to bring in an extra £1bn a year for the Treasury.

The industry has warned against a rise. UK Finance said further increases in bank taxes would weaken competitiveness, discourage investment and job creation, and work against the government's growth ambitions. JP Morgan chief executive Jamie Dimon said the UK already has one of the highest tax burdens on banks in the world, and said further sector-specific taxes could discourage investment and damage competitiveness. Cabinet ministers have warned Mr Healey against a bank tax, according to The Telegraph.