City banks start scenario work on a possible Budget tax after Healey's IMF praise
City AM reported that bank bosses and industry leaders will run scenario analysis on a Budget bank tax, a day after Healey praised banks at the IMF. The sources show firms modelling a range of outcomes, with no Treasury confirmation of any plan.
The Board Room · Leadership desk
Key figures: the banking surcharge currently sits at 3 per cent, down from 8 per cent before the 2023 cut. A reversal of the cut would be expected to raise some £2bn a year, City AM reports.
| Figure | Value | Note | Claim |
|---|---|---|---|
| Banking surcharge now | 3% | 8 | |
| Surcharge before 2023 cut | 8% | 8 | |
| Reversal would raise some | £2bn a year | 9 |
What happened
- On Thursday at the IMF summit, Healey called banks "part of the jewel in the British economic crown".
- The Guardian reported less than 24 hours later that the Treasury was drawing up plans to hike bank taxes, according to City AM.
- UK Finance wrote to Healey and Andy Burnham earlier this week with analysis of the economic impact of a rise in the banking surcharge.
- A Treasury spokesperson said decisions on tax are for the chancellor to set out at fiscal events, and that the Treasury does not routinely comment on rumour, speculation or proposals.
Why it matters
- Who has to decide decision This quarter, banking bosses must set how much weight a tax scenario carries in capital and investment plans; next quarter, the Budget shows whether that weighting was right.
- What doesn't add up contradiction Healey's praise and the Guardian report look opposed, but his answer on tax left Budget decisions open, so the clash is sharper in the City's telling than in his words.
- What it limits constraint Until the Budget, firms have no Treasury confirmation to test the Guardian report against, so each scenario rests on rumour and on Healey's hedged remarks.
Healey's own words at the IMF left room for a tax. Pressed on taxing the sector, he said banks were "hardwired into the economic fabric of this country" but added broadly there were "decisions to take in the Budget" [4]. Will Howlett, financials analyst at Quilter Cheviot, said "the government seems to be giving the UK's banking sector some mixed messages" [5]. One industry source called it "very surprising" to hear Healey's comments and then "finish the day" with news that the sector was set to be targeted [6].
Another banking source questioned whether any decisions had been made, and said negotiations between government departments over capital allocation and spending cuts were still ongoing [7]. That leaves the Guardian report unconfirmed. Banking bosses and industry leaders will now begin scenario work on it, sources told City AM [17].
We think firms are planning, across a range of outcomes. Their difficulty is choosing among them, because Healey is weighing different options [16].
City AM describes the Guardian report as plans to hike bank taxes in general [15]. The lever it names is the banking surcharge, which sits at 3 per cent after Jeremy Hunt cut it from 8 per cent in 2023 [8], a reduction of 5 percentage points [13]. Reversing that move is viewed as one of the top levers available to Healey and would be expected to raise some £2bn a year [9].
Lobbyists have raised concerns about the international competitiveness of UK bank taxation, and City AM sets PwC figures beside them. Total taxes on UK banks amount to 46 per cent of profits; the equivalent burden for banks is 42 per cent in Amsterdam, with Frankfurt at 39 per cent, Dublin at 29 per cent and New York at 28 per cent [10]. The UK figure is 4 points above Amsterdam and 7 above Frankfurt, but 17 above Dublin and 18 above New York [14]. UK Finance chief David Postings wrote to Healey: "The pro-growth choice at the Budget is to maintain tax stability and work with the sector on reforms that increase its capacity to finance the wider economy" [11].
The industry's objection is about investment. One top banker told City AM: "Any such increased tax would be a tax on investment" [12]. In our view, firms that share that view have a reason to weigh it in the timing of investment before the Budget. City AM did not report any firm changing a plan, and it did not give a Budget date.
What to watch
- Any further statement from Healey or the Treasury on bank taxation before the Budget, and the announcement of a Budget date.
- Whether the talks between government departments on capital allocation and spending cuts conclude, since a banking source tied tax policy to them.
- Whether UK Finance publishes its analysis of a surcharge rise or draws a public response from the Treasury.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence35
- Adoption
- Not scored
- Hype gap+30
- Incentives70
- Confidence55
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
On Thursday at the IMF summit, John Healey described banks as "part of the jewel in the British economic crown".
- [2]
UK Finance wrote to Healey and Andy Burnham earlier this week with analysis of the economic impact of a hike to the banking surcharge.
- [3]
A Treasury spokesperson said decisions on tax are a matter for the chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.
- [4]
Pressed on taxing the sector, Healey said banks were "hardwired into the economic fabric of this country" but added broadly there were "decisions to take in the Budget".
- [5]
Will Howlett, financials analyst at Quilter Cheviot, said: "the government seems to be giving the UK's banking sector some mixed messages".
- [6]
One industry source said it was "very surprising" to hear Healey's comments and "finish the day" with news the sector was set to be targeted.
- [7]
Another banking source pushed back on the idea that decisions had been made and claimed negotiations over capital allocation and spending cuts between government departments would still be ongoing, leaving tax policy up for speculation.
- [8]
The banking surcharge currently sits at three per cent after being reduced from eight per cent under Jeremy Hunt's Chancellorship in 2023.
- [9]
A reversal of the surcharge cut is viewed as one of the top levers available to Healey and would be expected to raise some £2bn a year.
- [10]
Figures from PwC show total taxes on UK banks amount to 46 per cent of profits, compared to 42 per cent in Amsterdam, 39 per cent in Frankfurt, 29 per cent in Dublin and 28 per cent in New York. Lobbyists have raised concerns about the international competitiveness of the UK.
- [11]
UK Finance chief David Postings wrote to Healey: "The pro-growth choice at the Budget is to maintain tax stability and work with the sector on reforms that increase its capacity to finance the wider economy".
- [12]
One top banker told City AM: "Any such increased tax would be a tax on investment".
- [13]
The 2023 cut to the banking surcharge was 5 percentage points.
- [14]
The UK total tax rate on bank profits is 4 points above Amsterdam, 7 above Frankfurt, 17 above Dublin and 18 above New York.
- [15]
The Guardian reported, less than 24 hours after Healey's supportive comments, that the Treasury was drawing up plans to hike bank taxes.
- [16]
Healey is weighing up different options to target the banking industry.
- [17]
Banking bosses and industry leaders will now commence scenario analysis regarding possible outcomes of a tax raid at the Budget, sources said.
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Sources
1 independent publisher whose own reporting we read for this story.
- cityam.comHealey’s ‘mixed messages’ on bank tax leave City blindsided
1 article · October 16, 2026
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