A fresh tax raid in the Budget on Britain’s banks would hand a competitive gift straight to rival global financial centres, warns the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green of deVere Group’s comments come as the financial sector gears up for a major lobbying push ahead of Chancellor John Healey’s Budget on 28 October, with union leaders pressing for a windfall levy on bank profits to help fund relief on household energy bills, and after a senior Wall Street bank boss has privately urged Healey against making the UK a more hostile place for banks to operate.
He says: “Every finance minister eventually learns the same lesson the hard way. Capital doesn’t sit still and wait to be taxed. It moves to wherever the environment is friendliest, and it moves fast.”
Nigel Green points to New York as a live warning. He notes reports of a material decline in finance roles there, with executives openly linking the exodus to the city’s tax burden.
“London should be paying very close attention to what’s happening across the Atlantic.
“A city can price itself out of the industry that built its skyline, and once those jobs relocate, they rarely come back on demand.”
UK banks already carry a heavier load than most competitors realise.
On top of standard corporation tax at 25%, lenders pay an additional 3% surcharge plus a separate levy on their balance sheets, both introduced in the aftermath of the 2008 crisis and never fully unwound.
“Nobody is asking for sympathy for an industry that’s profitable again,” comments the deVere CEO.
“But Britain’s banks are already taxed well above the rate applied to most other sectors. Layering a windfall charge on top of that only deepens an imbalance that already exists.”
He acknowledges the political pressure Healey faces, with reports showing the UK’s largest banks posted combined profits above £29bn in the first half of the year, a figure unions are using to argue the sector can easily absorb more.
“Big profit numbers make an easy talking point for anyone pushing a windfall tax.
“What gets left out is that financial and professional services already deliver a record share of the tax take that funds the schools, hospitals and energy support Healey wants to protect.
“Punishing the sector that pays for those things is self-defeating.”
Billions of pounds in planned UK office expansions and hiring are directly tied to the tax outlook, meaning that firms are watching the Budget closely before committing further.
“Global banks don’t make 30-year property and headcount decisions based on hope,” he says.
“They make them based on whether a government looks predictable. Every signal of a harsher regime pushes that decision further from London and closer to Frankfurt, Dublin or New York.”
Healey has a narrower path than his predecessor faced, given weaker growth and tighter borrowing headroom, which makes the temptation to reach for bank profits even stronger.
“I understand the arithmetic behind wanting an easy pot of money to fund energy bill support,” says Nigel Green.
“But taxing success out of the country doesn’t fund anything for long. It just moves the tax base somewhere else and leaves a smaller economy behind to cover the bill.”
The deVere Group chief executive concludes: “Growth comes from stability, not from raiding the sector that’s finally performing.
“Healey has a genuine chance to back the industry that funds the country. Reaching for a windfall tax instead would be a costly mistake dressed up as a quick win.”
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