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Some of Britain’s leading business groups are mobilizing to step up their opposition to a Treasury tax raid on the banking sector in this month’s Budget, days before sector chiefs meet the Chancellor in person for the first time.
Sky News has learned that trade associations, which are said to include UK Finance, AFME and TheCityUK, are circulating a letter to send to John Healeythe chancellor, in which she intends to warn that increasing the tax burden on the banking sector risks driving businesses out of the UK without raising additional revenue.
The CBI should also be involved in the circulation of the letter.
A draft version seen by Sky News said: “While we recognize the challenging fiscal pressures facing the government, it is important to note that our industry already has a higher tax burden than our key international competitors.
“Further increasing the burden through any additional sector-specific measures would make it more difficult to channel finance and liquidity to businesses seeking to invest and grow in the UK.
“As well as weakening investor confidence and damaging the UK’s attractiveness, a higher tax burden may not necessarily generate higher tax receipts when capital, people and businesses move elsewhere.
“It could reduce the availability of finance and protection for households and businesses, and risk undermining the growth that both you and the Prime Minister have rightly identified as key to the country’s long-term success.”
The intervention by business groups is the latest in a series of efforts to end a tax raid by Mr Healey on the banking industry later this month.
UK Finance, whose members include Barclays, HSBC, Lloyds Banking Group and NatWest Group, has already written to him in recent weeks to object to the prospect of a windfall tax or a significant increase in the corporation tax surcharge applied to bank profits.
earlier this week, Sky News revealed that a dozen mid-tier banksincluding Revolut and Monzo, had called on the chancellor to raise the threshold at which the surcharge is applied.
In the trade unions’ latest letter, city leaders echoed Mr Healey’s Labor Party conference speech in which he “set out your ambition for a stronger partnership between government and business and argued that ‘the only long-term answer is growth'”.
“Your upcoming budget is an important opportunity to strengthen the conditions for this partnership,” said her draft.
“A strong and internationally competitive financial and related professional services industry is essential to achieving the Government’s growth targets and supporting resilience and prosperity in every postcode across the country.
“A key component of this is maintaining a stable and internationally competitive tax environment.
“This gives companies and investors the confidence to provide the capital, loans, investments, insurance and expertise that businesses and households rely on.”
They added: “Tax decisions should be assessed not just by the revenue they are expected to raise in the short term, but by their impact on investment, competitiveness and the ability of companies to support households and businesses across the UK over time.”
“Our organizations share the view that the UK needs a fiscal framework that is stable, predictable and internationally competitive, supporting long-term investment and growth.”
Mr Healey will meet bank chiefs next Tuesday, although he is unlikely to directly discuss the possibility of industry-specific tax increases.
Unions have called on the chancellor to raise billions of pounds from the industry to fund government commitments elsewhere, amid a period of bumper profits for the UK’s biggest banks.
None of the business groups contacted by Sky News on Friday afternoon would comment.
