Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy. Britain’s banks may be ‘part of the jewel’ in the UK economic crown, as chancellor John Healey put it yesterday, but that won’t protect them from being hit in this month’s budget. John Healey is poised to raise the tax take from Britain’s banks in his 28 October budget, the Guardian understands, as the chancellor looks to fix the damage inflicted on the public finances by war in the Middle East.
As my colleagues Heather Stewart, Jessica Elgot and Kalyeena Makortoff reported last night, Healey has decided to tap the financial sector for additional revenue. One option understood to be under discussion – reversing cuts to the bank surcharge made by Jeremy Hunt – would raise upwards of £2bn a year. Industry figures believe that will probably mean raising the surcharge back to 8%, from 3% at present, to help bolster the government’s fiscal headroom (which has been eroded by the jump in borrowing costs this year).
News of the looming tax raid came hours after Healey praised the banks as crucial to supporting economic growth, telling reporters: “People too often see them as big, distant financial institutions, when they are hardwired into the economic fabric of this country and our future prospects.” Banks sound resigned to being shorn at the budget, but they’re not happy about it. Banking sector trade body, UK Finance, warned that “further increases in bank taxes would weaken competitiveness, discourage investment and job creation, and work against the government’s ambition to deliver growth in every postcode”. Senior banking executives have told the BBC they expect the sector to be “on the menu” at the budget…. 10am BST: Eurozone trade and inflation data 1.30pm BST: NY Fed Services Activity Index
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