UK Chancellor John Healey told the bosses of the country's largest banks on Tuesday that the government faces a tough budget outlook, but he gave them no guidance on whether the Budget later this month will raise bank taxes. Executives from Barclays, HSBC, Lloyds, NatWest, Nationwide and Santander used the meeting to argue against a tax raid on the sector.
Healey stays silent on tax plans
Chancellor John Healey met the chiefs of Britain's biggest lenders inside 11 Downing Street on Tuesday, in what was likely their last meeting with him before the Budget. He told the group the government faced a tough budget outlook but said no decisions on taxes had been made, according to people familiar with the discussions.
Healey is under pressure to raise revenue after rising borrowing costs and new spending commitments, including on defence, widened a fiscal hole the Treasury must now fill. That pressure has pushed the Treasury to weigh a range of tax increases, among them a windfall levy on bank profits. The chancellor opened the meeting by outlining Budget priorities to give households and businesses breathing room while backing jobs and growth, and Lucy Rigby, economic secretary to the Treasury, ran most of the session, the people said.
Banks warn of growth and competitiveness hit
Bank executives argued that higher taxes would hurt the government's growth agenda and widen the gap between London and rival hubs such as New York. They also told Healey that international shareholders were concerned about the tax regime for British lenders, warning that a higher levy would be self-defeating because it would raise the cost of capital and curb lending.
HSBC chief executive Georges Elhedery pointed to the bank's past experience with an activist investor to illustrate the pressure international shareholders can apply, according to one person briefed on the discussions. In 2022, HSBC shareholder Ping An pushed for the bank to split into eastern and western operations.
Industry braces for an "uphill" fight
Banks have lobbied the government for weeks to spare them in the Budget, but behind closed doors they admit the battle is an uphill one after another year of record profits. Britain's biggest four banks posted a combined £29bn of pre-tax profits in the first half of this year, making the case against new fiscal policy measures harder to sustain.
A Treasury spokesperson declined to comment on the speculation, adding that Healey regularly meets sectors across the economy. Treasury insiders said the bank executives welcomed his recent remarks on fiscal discipline, and according to one attendee, Healey said there was "nothing progressive about losing control of the public finances".
Source: Financial Times
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