Budget 2026: How Chancellor John Healey will hammer the City

John Healey has faced last minute calls to ditch a mooted £2 billion Budget tax hit on banks in the City.

Former Bank of England chief economist Andy Haldane

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But former Bank of England chief economist Andy Haldane, who advised Andy Burnham before he became Prime Minister, urged the Government to resist the temptation of higher levies on banks.

“My hope is that this is a Budget for business and for bond markets, in other words the Government signals voluntarily restraint on Government spending and chooses voluntarily not to raise taxes on households or on businesses,” he said as Mr Healey finalises details of his first Budget on October 28.

“That would be the best thing they can do to get growth going. That is my hope. It is not my expectation.

“My expectation is that we will see some further borrowing through dipping into headroom…

“We will see some further tax rises, and neither of those, I think, are good news from a growth perspective.

“Or put in a nutshell, I expect a Budget for the backbenchers rather than for business or the bond markets.”

Former Chancellor Jeremy Hunt cut the bank surcharge in 2023

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Mr Healey has described banks as part of "the crown jewels" of Britain’s economy.

Yet he seems intent on raking billions more out of them in the Budget.

The simplest way for the Chancellor to squeeze more out of the Square Mile is to reverse a cut in the surcharge that banks pay on corporation tax, from 8% to 3%, made three years ago by then Conservative Chancellor Jeremy Hunt.

Such a move would rake in an extra £2 billion-a-year or so for the Treasury.

Paul Nowak, General Secretary of the Trades Union Congress

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He is also determined not to frighten the markets with his Budget, which could drive up the cost of Government borrowing and mortgage rates for homeowners if they got the jitters, repeatedly stressing that he will stick to fiscal discipline.

His plan for Britain’s economy is expected to be far lower key than that of his predecessor Rachel Reeves who imposed higher taxes on businesses of tens of billions of pounds, widely blamed for hitting growth.