Speaking at the IMF’s annual meetings in Bangkok, Berger was responding to questions about the government’s reported plans to raise additional revenue from the banking sector. He said that if additional tax revenue were needed, reforming property taxes or VAT might be a good place to start.
“Ultimately, with taxes roughly at 40% of GDP – historically, for Britain, a high number – then of course balancing these measures on the fiscal [spending] side, doing a bit more there, makes good sense,” Berger said.
City lobbyists have been campaigning against the proposed bank tax hike. In a letter sent to Healey and Prime Minister Andy Burnham on October 12, UK Finance chief executive David Postings shared research suggesting that reversing the previous government’s cut to the bank surcharge – restoring it to 8% from its current 3% – would leave annual UK GDP £1.2bn lower in real terms by 2029-30. The research also argued that lending would be £10.4bn lower in the same period, with banks issuing fewer business loans and mortgages.
“The UK’s banking sector already makes a vital contribution to the wider economy,” Postings wrote. “To sustain this vital contribution, the budget should avoid any increases in bank-specific taxes, as this would risk constraining the sector’s ability to lend and invest.”
However, analysis from the Trades Union Congress shows the Treasury has already lost £6bn over the three years since the surcharge cut came into force in 2023. At the same time, the UK’s four largest lenders – HSBC, NatWest, Barclays and Lloyds – collectively reported £29.2bn in profits over the first six months of the year, with nearly half, £13.7bn, returned to shareholders through dividends and buybacks. Over the past five years, those banks have generated £200bn in pre-tax profits.
Author and former banker Philip Augar described the sector as “enjoying boom conditions” partly due to good management but also because of economic conditions “not of their own making”.