UK Gov't Considers Bank Levy to Fill £30bn Budget Gap
A new levy on US banks is being considered by the UK government to plug a significant fiscal gap. Think tanks and rival politicians are calling for this measure, which is seen as politically palatable and economically less disruptive. The move has sparked warnings from the 'Big Four' bank bosses, who argue against a potential tax hike.
Rachel Reeves, the Shadow Chancellor, is exploring a raid on Britain's banking giants to address a £30bn black hole in the public finances. The two main options for this cash grab are hiking the bank surcharge or taxing 'windfall' profits from quantitative easing. The US banking industry's tax rate is notably higher than its European peers, making it a potential target.
The big five US banks are projected to make around £53bn in profits this year. However, it's important to note that a possible tax increase currently under discussion would mainly affect private individuals such as pensioners, landlords, and the self-employed, rather than directly targeting specific banks like HSBC, Barclays, Lloyds, and NatWest. The Treasury and Reeves have distanced themselves from a bank tax raid, but it remains a likely option for the November 26 budget.
The prospect of a new bank levy has reignited budget speculation, with Reeves potentially having to alienate the banking industry further if she imposes a new levy. The debate highlights the search for additional revenue streams to balance the UK's public finances.
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