Tories to warn Burnham on ‘bending to left’ on bank tax raid

Kemi Badenoch, a Conservative politician, is set to deliver a stern message to Labour leader Andy Burnham regarding the potential imposition of a bank tax during her visit to Edinburgh. The Conservative Party is warning Burnham against "yielding to left-wing backbenchers and trade union paymasters," as pre-Budget discussions intensify.

The banking industry is bracing for a potential cash raid, following a recent letter from top City executives to Labour Party leader Ed Healey. The letter cautioned that raising taxes on banks could force businesses out of the United Kingdom.

Chancellor John Healey met with banking leaders last week, but refrained from providing clear guidance on tax policy. He is reported to have cautioned the industry that the UK is facing a "challenging fiscal picture." Labour's Shadow Chancellor Andrew Griffith expressed concern that targeting the financial services sector would hinder growth, urging the government to instead cut spending.

The Conservatives have argued that they are the only party committed to reducing the welfare bill, deficit, and taxes, in order to boost the UK economy.

The banking sector has highlighted that it already faces a high tax rate compared to international competitors. According to PwC, UK banks pay 46% of their profits in taxes, compared to 42% in Amsterdam, 39% in Frankfurt, 29% in Dublin, and 28% in Ireland. Banks in the UK are additionally burdened by a sector-specific surcharge of 3% on top of the standard corporation tax.

Some have suggested raising the surcharge to 8% to generate additional revenue, while others advocate for a windfall tax. Banking executives have voiced opposition to any additional taxation on the sector.

Former Citibank CEO Dame Jane Fraser expressed concern about the additional tax burden on banks in Britain. The Conservatives have proposed a series of banking regulation reforms, including scrapping ring-fencing, eliminating the Financial Ombudsman Service, and introducing capital buffer requirements, which they claim would inject £450 billion into the UK economy.