Healey Faces Cabinet Pushback Over Proposed Bank Tax Ahead of Budget

Chancellor John Healey is reportedly facing a rebellion within his Cabinet over proposals to raise taxes on banks as he finalizes his first Budget. Sources indicate that senior ministers have warned Healey that a significant tax increase on the banking sector, potentially set to be announced later this month, could jeopardize Prime Minister Andy Burnham's commitment to fostering economic growth.

This internal discord comes as Healey is scheduled to meet with the leaders of the UK's major banks on Tuesday. Executives from Lloyds Banking Group, Barclays, HSBC, and NatWest Group are expected to attend the summit, where they are anticipated to voice strong opposition to any new or increased levies.

The Chancellor is under pressure to find billions of pounds to fund the government's Defence Investment Plan. Compounding this challenge, his fiscal flexibility is reported to have diminished to approximately £12 billion, largely due to the economic repercussions of the Iran war and rising public borrowing costs.

Adding to the complexity, trade union leaders are advocating for a substantial tax on banks to help finance a reduction in energy bills for consumers this winter. Conversely, Jamie Dimon, CEO of JP Morgan, has cautioned against such a move, suggesting it could prompt investment to shift to other countries.

Some ministers have privately expressed concerns that taxing banks could send a negative signal to potential investors in the UK. One minister reportedly stated that it would be imprudent to increase taxes across the board, especially as businesses are already grappling with higher business rates and National Insurance contributions.

Treasury officials have indicated that Healey will adopt a receptive stance during his discussions with banking leaders. According to HMRC figures, the banking sector's tax contributions rose by 8.5% to £39.1 billion in the 2025-26 tax year. Receipts from the profit surcharge, specifically, saw a significant increase, driven by a rise in industry-wide profits.

The Trades Union Congress has proposed increasing the bank profit surcharge from its current 3% to at least 8%, estimating this could generate £9 billion for the Treasury over four years. A Treasury spokesperson commented on the matter, stating that decisions regarding taxation are ultimately the Chancellor's to announce at fiscal events and that the department does not typically comment on rumors or speculative proposals.