IMF Urges UK to Target Pensions and Welfare Over Bank Tax Rise
The International Monetary Fund has urged Chancellor John Healey to find savings in pensions and welfare rather than raise taxes on Britain's banks in the budget on 28 October. The Guardian The advice comes ahead of a budget in which Healey is under pressure to lower borrowing without weakening growth.
The call came from Helge Berger, deputy director of the IMF's European department, speaking in Bangkok where the Fund held its annual meetings in the week of 12 October. Berger said Britain's taxes stand at roughly 40% of gross domestic product, which he described as historically high for the country. Given that level, he said, it might be better to "put the emphasis" on spending cuts.
If extra revenue were still needed, Berger said reforming property taxes or VAT might be a good place to start. He cited the pensions triple lock and better targeting of social benefits as areas to emphasize rather than a bank tax.
Healey has kept his options open ahead of the 28 October budget. He has said banks are key to the British economy and has stressed his commitment to lowering public borrowing, while not ruling out higher bank taxes. Reuters
The banking industry has lobbied against such a rise. David Postings, chief executive of the industry group UK Finance, wrote to Healey on 12 October opposing increases in bank-specific taxes, in a letter copied to Prime Minister Andy Burnham. Research shared by UK Finance suggested that restoring the bank surcharge, an extra tax on banks, to 8% from 3% would leave annual UK GDP £1.2bn lower in real terms by 2029-30. The same research put bank lending £10.4bn lower in 2029-2030 if the rate rose, compared with holding it at 3%.
Unions and critics of the banks make a different case. TUC analysis of HMRC corporate tax receipts found the Treasury lost £6bn over three years since the surcharge cut took effect in 2023. The country's four largest lenders — HSBC, NatWest, Barclays and Lloyds — reported £29.2bn in profits in the first six months of 2026, with £13.7bn pledged to investors through dividends and share buybacks. Those four banks earned £200bn in pre-tax profits over the past five years, and former banker Philip Augur said a moderate increase in bank taxation could raise about £2bn to £3bn a year.
Banking shares dipped after a media report that Healey was set to tax banks in the budget. Reuters The IMF set out its wider view for the region in its Regional Economic Outlook for Europe for October 2026.
