CHANCELLOR HEALEY SET TO RAISE BANK TAXES IN BUDGET

Chancellor John Healey is preparing to raise taxes on Britain's banking sector in his first budget, due on 28 October, according to a report citing people familiar with the plans. The move is intended to help offset the impact of the war in the Middle East on the public finances. Healey is currently in Bangkok, where the International Monetary Fund has praised the UK's progress towards balancing its books and urged him to "stay the course". To keep deficit reduction plans on track amid rising government borrowing costs, he has decided to seek additional revenue from the financial sector, the report said. One option under discussion is reversing cuts made to the bank surcharge by former chancellor Jeremy Hunt, which could raise more than £2bn a year.

Britain's four largest lenders, HSBC, NatWest, Barclays and Lloyds Banking Group, have generated a combined £200bn in pre-tax profits over the past five years, helped by higher interest rates. Healey has faced repeated calls from thinktanks and trade unions to tax banks more heavily, an option his predecessor, Rachel Reeves, considered but rejected amid concerns it could deter investment. TUC general secretary Paul Nowak said Britain's big four banks were making a billion pounds a week, with bonuses at a post-crash record, and said it was "time to make sure banks pay their fair share". Speaking to journalists in Bangkok, Healey described banks as "hardwired into the economic fabric of this country and our future prospects", rather than "big distant financial institutions". He has also been quoted elsewhere calling banks a "jewel in the crown" of the British economy, amid concern in the sector about a possible tax rise.

Healey is nevertheless believed to be minded to increase the surcharge banks pay on their profits, on top of corporation tax, the report said. The surcharge is separate from standard corporation tax and applies specifically to banking sector profits. Any change would be confirmed, along with the rest of the budget's tax measures, on 28 October. The IMF's remarks in Bangkok formed part of its wider assessment of the UK's efforts to manage higher government borrowing costs.