Chancellor 'mulls windfall tax on banks and oil companies'
The Chancellor is understood to want to ensure tax rises in his first budget are lower than those embarked upon by Rachel Reeves
John Healey is said to be weighing a windfall tax on banks and oil companies in his first budget, as Treasury officials grapple with a black hole in the public finances.
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Officials in the Treasury are said to be considering imposing the two levies as they fight to plug a £4.7bn hole in the nation's finances.
Mr Healey will deliver his first Budget as Chancellor on October 28, following his appointment by Prime Minister Andy Burnham last month.
He is faced with the challenge of finding more money to fund Mr Burnham’s devolution priorities and increased defence spending, as well as new cost-of-living measures such as cutting VAT from energy bills and reducing business rates for pubs.
The Chancellor is understood to want to ensure tax rises in his first budget are lower than those embarked upon by his predecessor Rachel Reeves, the Telegraph reports.
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A spokesperson for the Treasury told LBC: “The Chancellor is fully focused on his priorities, which will boost business, help with the cost of living and support people in every postcode.
“As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on proposals made."
Treasury officials said that the bank tax regime was kept "under review" to ensure that "the objectives of growth and responsible fiscal policy are appropriately balanced".
A windfall tax - a levy placed on companies which have promoted from something they were not responsible for - would shield individual taxpayers while raising funds for defence and other priorities and restoring the fiscal headroom.
Increasing taxes on banks was described as one official as “low-hanging fruit" that the government's top brass would find hard to resist, Bloomberg reported.
Campaigners have been critical of oil giant BP, after the firm revealed its strongest quarterly profits for four years after being boosted by volatile energy prices during the Middle East conflict.
One option being mulled is a time-limited tax on banking profits, similar to a policy applied to oil and gas firms at the start of the Ukraine war, while another is extending the levy beyond 2030 and increasing the tax on oil and gas giants.
Jamie Dimon, the boss of JP Morgan, previously warned the Chancellor against raising taxes on bank earnings.
He told Mr Healey on a phone call that higher taxes can result in jobs being driven elsewhere, citing a decline in finance roles in New York that he partly blamed on the city’s tax burden, according to the Financial Times.
He warned against a windfall levy on bank profits or wider tax rises on wealth, the newspaper reported, citing a person briefed on the conversation.
The influential chief executive of the US investment banking giant has previously sounded warnings against raising taxes on the industry and criticised the UK’s corporation tax surcharge for banks.
Some groups, including the Trades Union Congress (TUC), are calling for the Government to increase the windfall levy from the current rate of 3% to at least 8%, which it said would raise £9 billion for the Treasury over four years.
Earlier this month, Mr Dimon said in an interview for the Master Investor Podcast that he “always thought it was wrong”, adding: “JP Morgan did not damage the UK… I just thought it lacked principle to punish a company that had nothing to do with the crisis, and is still there 16-17 years later.”
He added: “If you have an uncompetitive tax system, capital leaves your country and… goes to other countries”, he warned, referring to an exodus of companies from London’s stock markets in the past two years.
“I wouldn’t want to see that, if I was running a country,” he said, stressing that he wants “to see the UK thrive”.
Mr Healey has promised plans would be “built on fiscal discipline” and meet the fiscal rules set by previous chancellor Rachel Reeves.
Experts, including the National Institute of Economic and Social Research (Niesr), have warned Mr Healey that he will need to either raise taxes or cut spending elsewhere as pressure on the public finances has left no room for extra borrowing.