Cut benefits instead of taxing banks, IMF tells Healey

Banking executives have warned the BBC that the sector may be targeted in Chancellor Healey's upcoming Budget announcement. Despite being described as part of the UK's "crown jewels," the sector has been facing calls for additional taxes due to their significant profits. The top four banks collectively earned £15bn in profits during the first six months of the year.

However, the trade body representing the banks, UK Finance, has cautioned that raising taxes further could weaken competitiveness, deter investment, and impede job creation, which contradicts the government's goal of growth across all regions. Banks currently pay a 3% surcharge on top of the 25% corporation tax rate, along with an asset levy on their balance sheets. These taxes contributed nearly £40bn to the Treasury last year, including a £1.4bn from the bank levy and £1.2bn from the surcharge.

The government has the option to revert the surcharge to its previous 8% level, potentially generating an extra £2bn annually. Another proposed measure, a moratorium on banks using past losses to offset current profits, could yield approximately £1bn per year for the Treasury. This would be more palatable compared to the status quo and would spare foreign banks, like JP Morgan, from an additional tax burden.

Industry leaders, however, argue that any tax increase exclusively targeting UK banks while exempting foreign entities would be inconsistent with the government's commitment to supporting British business.