Bank shares drop as John Healey prepares to raise taxes on the banking sector in the budget – business live

Introduction: John Healey poised to raise taxes on banks in budget

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

Britain’s banks may be ‘part of the jewel’ in the UK economic crown, as chancellor John Healey put it yesterday, but that won’t protect them from being hit in this month’s budget.

John Healey is poised to raise the tax take from Britain’s banks in his 28 October budget, the Guardian understands, as the chancellor looks to fix the damage inflicted on the public finances by war in the Middle East.

As my colleagues HeatherStewart, Jessica Elgot and Kalyeena Makortoffreported last night, Healey has decided to tap the financial sector for additional revenue.

One option understood to be under discussion – reversing cuts to the bank surcharge made by Jeremy Hunt – would raise upwards of £2bn a year.

Industry figures believe that will probably mean raising the surcharge back to 8%, from 3% at present, to help bolster the government’s fiscal headroom (which has been eroded by the jump in borrowing costs this year).

News of the looming tax raid came hours after Healey praised the banks as crucial to supporting economic growth, telling reporters:

“People too often see them as big, distant financial institutions, when they are hardwired into the economic fabric of this country and our future prospects.”

Banks sound resigned to being shorn at the budget, but they’re not happy about it.

Banking sector trade body, UKFinance, warned that “further increases in bank taxes would weaken competitiveness, discourage investment and job creation, and work against the government’s ambition to deliver growth in every postcode”.

Senior banking executives have told the BBC they expect the sector to be “on the menu” at the budget….

Shares in UK banks are dropping at the start of trading, as investors react to the Guardian’s scoop that John Healey is poised to increase taxes on Britain’s banks in his 28 October budget.

Lloyds Banking Group are the top faller on the FTSE 100, down around 1.9%, with NatWest dropping by 1.6%.

BoE's Bailey: seeing 'quite subdued' evidence of second round inflation effects

Heather Stewart

Elsewhere in Bangkok today, Bank of England governor Andrew Bailey, was interviewed at the Institute of International Finance annual members’ meeting, being held across town in Bangkok.

With the BoE’s monetary policy committee due to set interest rates in three weeks’ time, Bailey said he was not yet seeing many signs of the “second round effects,” that would indicate inflation has spread beyond the energy sector.

Bailey said:

“I think it’s too early, but to the extent we’ve seen evidence, so far it’s been quite subdued.”

Warsh: Super intelligence driving 'massive investment surge'

Heather Stewart

Heather Stewart is the Guardian’s economic editor, reporting from Thailand.

US Treasury secretary Scott Bessent hasn’t bothered to show up in Bangkok this week for the IMF/World Bank annual meetings, but Federal Reserve chairman KevinWarsh is here.

He appeared on stage earlier today in a “fireside chat” with an old friend: the IMF’s managing director - KristalinaGeorgieva.

Aside from lavishing praise on Warsh, Georgieva asked him about the potential economic impact of AI.

He said AI - for which he used Donald Trump’s preferred term, “Super Intelligence,” is, “probably the most consequential change to the US and the global economy in my lifetime to this point,” which is causing a “massive investment surge”.

Eventually, he said it will boost productivity - “there really is, I think a huge benefit to the global economy, to the US economy over the horizon.” But - with inflation rising sharply in the US - he said there are likely to be short-term bumps in the road.

“If you believe, like I believe, that it will make economies and countries that put it to good use, more productive, that it’s going to make it so that we will have more wealth, then that has to be a very good thing. But the path from where we are to there is likely to be a very bumpy one.”

Echoing the IMF’s warnings earlier this week about the potential for an AI-led market correction, Warsh added, “we really don’t know what the market structure is going to be of these new technologies. Who’s going to get to make the money? What are the consequences for those that bet that they were going to make money, but the market structure doesn’t allow it?” He said his attitude was one of optimism, leavened by seriousness.

In terms of the short-term outlook, it was not surprising given his rejection of “forward guidance,” that Warsh declined to give any sense of where interest rates might go, after last month’s increase. “I don’t prejudge meetings. I don’t believe in saying now what I might do at the meetings that we have in the balance of this year,” he said - prompting Georgieva to joke that he had disappointed half the audience.

CBI: Chancellor should avoid 'further sector-specific taxation'

The Confederation of British Industry has suggested John Healey should avoid “further sector-specific taxation”, such as a bank tax.

LouiseHellem, chief economist at the CBI, said:

“The financial services sector is vital to driving investment, innovation and business growth across the economy. Government has set the right direction through its Financial Services Growth and Competitiveness Strategy and the Leeds Reforms – the priority now is delivery.

“The autumn Budget should set the agenda for a competitive and predictable environment that turns those reforms into tangible progress, unlocking domestic investment, deepening UK capital markets and helping more firms to scale and grow.

“It should also avoid measures that would undermine competitiveness or weaken incentives to invest. With the business tax contribution already at a record share of receipts, that means avoiding further sector-specific taxation, including on a banking sector already facing a higher tax rate than competing international financial centres.”

Introduction: John Healey poised to raise taxes on banks in budget

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

Britain’s banks may be ‘part of the jewel’ in the UK economic crown, as chancellor John Healey put it yesterday, but that won’t protect them from being hit in this month’s budget.

John Healey is poised to raise the tax take from Britain’s banks in his 28 October budget, the Guardian understands, as the chancellor looks to fix the damage inflicted on the public finances by war in the Middle East.

As my colleagues HeatherStewart, Jessica Elgot and Kalyeena Makortoffreported last night, Healey has decided to tap the financial sector for additional revenue.

One option understood to be under discussion – reversing cuts to the bank surcharge made by Jeremy Hunt – would raise upwards of £2bn a year.

Industry figures believe that will probably mean raising the surcharge back to 8%, from 3% at present, to help bolster the government’s fiscal headroom (which has been eroded by the jump in borrowing costs this year).

News of the looming tax raid came hours after Healey praised the banks as crucial to supporting economic growth, telling reporters:

“People too often see them as big, distant financial institutions, when they are hardwired into the economic fabric of this country and our future prospects.”

Banks sound resigned to being shorn at the budget, but they’re not happy about it.

Banking sector trade body, UKFinance, warned that “further increases in bank taxes would weaken competitiveness, discourage investment and job creation, and work against the government’s ambition to deliver growth in every postcode”.

Senior banking executives have told the BBC they expect the sector to be “on the menu” at the budget….