Jeremy Hunt, the former Conservative chancellor, has urged John Healey not to raise taxes on banks in the Budget on 28 October, arguing that an increase in the bank surcharge would mean less investment, lower growth and fewer jobs.
Writing in The Times, Hunt said the chief executives of HSBC, Citi, NatWest, JPMorgan and Santander had all sounded the alarm about new bank taxes and that “the chancellor should take note”.
He was responding to a suggestion from the TUC that lifting the surcharge to 35 per cent could raise up to £60bn. The TUC has said that sum would be raised over four years, and that the surcharge is currently an additional 3 per cent of corporation tax on banking profits above £100m.
Hunt acknowledged that the public finances are tight, citing defence and social care as large commitments to come, and said the TUC proposal “will look tempting”. He added: “The problem is that capital is mobile.”
Hunt cited PwC figures showing that total taxes on London banks amount to 46 per cent of profits, compared with 42 per cent in Amsterdam, 39 per cent in Frankfurt, 29 per cent in Dublin and 28 per cent in New York. The US, Switzerland and Singapore do not levy any bank-specific taxes, he said.
London’s higher rates date from the financial crisis, when the public demanded that banks compensate taxpayers for bailing them out, he wrote, but those debts have now largely been repaid.
His article follows a warning in August from Jane Fraser, the Citigroup chief executive, that she was worried by the UK bank tax rate. Nigel Green, chief executive of deVere Group, has said a windfall tax would push jobs and investment to rival financial centres.
Hunt said the City had been performing well despite its tax burden. He quoted The Economist as concluding earlier this year that the City had suffered “startlingly little damage” from Brexit, and said Z/Yen, the City think tank, now ranks London level with New York after it trailed in 2020.
Financial services help to make the UK the world’s second largest services exporter, he wrote, and the sector’s overall tax revenues pay for about half the cost of running the NHS.
As chancellor, Hunt cut the surcharge from 8 per cent to 3 per cent to compensate for the rise in corporation tax. “It was not a popular decision but total tax revenue from the banking sector continued to rise,” he wrote.
HMRC statistics show the lower rate took effect in April 2023. They put receipts from the banking sector at £35.2bn in the 2024 to 2025 financial year, the latest covered by that release.
Hunt said that when major financial institutions say they will divert investment elsewhere if they are hit with more taxes, they are describing economic reality. “They won’t pack up immediately but over time the damage will become clear,” he wrote.
He said two thirds of financial services jobs are outside London, in cities such as Edinburgh and Leeds, and that the UK tech sector depends on easy access to capital in what he called the world’s second largest financial services market.
Hunt made the same argument about capital gains tax. He cited the Institute for Fiscal Studies as saying, before rates rose in 2024, that raising them without fixing a flawed system “would not be the decision of a chancellor who was serious about growth”. Too many wealthy investors had left the UK after inheritance tax was introduced on non-doms, he wrote.
He also noted that the chancellor had used the word hope 21 times in his conference speech, and said the more important principle for a budget was to do no harm.
The Treasury said last month, in response to a separate proposal that banks offer a five-year freeze on deferred tax assets: “Decisions on tax are a matter for the chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
Hunt was chancellor from 2022 to 2024 and chairs the Financial Markets and Services all-party parliamentary group.
