Healey hammers the banks: The Chancellor is set to raise taxes despite kind words, says ALEX BRUMMER

As a matter of good form, Labour Chancellors do not usually extol British and overseas banks. 

The dialogue is much more, to use the language of former Chancellor Rachel Reeves, about helping working people.

John Healey seeks to reverse the view that it is handbags at dawn when it comes to banking and business.

A week ago, this column complained that representatives of the City of London were letting the side down by failing to speak out loudly against new bank taxes.

I argued it could hurt business lending and send more mobile financial groups scuttling overseas.

It required an American, Jamie Dimon of JP Morgan, to ripple his muscles and gently threaten to pull back from his bank’s proposed new £3billion headquarters at Canary Wharf in East London.

Chancellor John Healey, centre, talks to German Vice Chancellor Lars Klingbeil, left, and  Australian Treasurer Jim Chalmers, right, at the IMF/World Bank meeting  in Bangkok

It is evident that the message is getting through. It is high praise when the Chancellor describes the banks as ‘crown jewels’ of the economy and ‘hard-wired’ into the economic fabric of the nation.

That doesn’t register as a finance minister who is about to clobber a sector. One cannot imagine Healey’s words will go down too well with Angela Rayner, Lucy Powell and other more radical members of the Cabinet.

This is especially true of a Treasury incumbent who has sought to hold his peace ahead of this month’s Budget.

The Chancellor’s understandable caution follows the fiasco of the last couple of years, when every possible Budget measure was briefed or leaked to the press.

The speculation undermined consumer and business confidence and understandably led citizens, worried about their financial futures, to move savings rapidly and unnecessarily to safer havens.

Healey and the Treasury are anxious to avoid chasing away international banks who already are paying taxes of up to 50 per cent. But there are good reasons for leaving the UK banks alone.

There is public frustration that banks are coining money from windfall income arising from the interest rate gap between what they pay depositors and charges they make to borrowers.

In addition, there are endowment profits reaped from unremunerated cash in current accounts, and the free money earned on excess reserves kept overnight with the Bank of England.

All this is true. But it has taken almost two decades, since the 2008 financial crisis, for the UK banks to find their footing again. Long after the valuations of American and some European lenders were restored, British banks were valued by the stock market at less than book value.

Restoring the confidence to render them investable again, and as reliable lenders, has taken a long time.

They currently are valued by shareholders at 1.7 times book value.

An extra bank tax would inevitably undermine the recovery and add a new level of financial risk to a market economy already in danger from record sovereign debt yields and volatile AI valuations.

Healey, by most accounts, has moved away from full equalisation of capital gains levies with income tax. A similar compromise could possibly see the Treasury go for a modest banking levy.

Brokers Jefferies suggests an increase of 2 per cent to 3 per cent on the current bank surcharge of 3 per cent is likely, rather than a run-up to the full 8 per cent, where it previously stood.

Whatever the outcome, it is good to hear a Chancellor with a trade union history suggesting that too much of the tax burden has fallen on business and finance, and they deserve a break.

Restoring the confidence of enterprise after the last two Budgets has taken too long. Record levies punished the booming services sectors of IT, finance and the professions which are now boosting output.

Wielding the sledgehammer of more taxes again would be a colossal mistake.

Film Noir

The 12-hour flight from London to Bangkok taken by bankers, financial officials and the media is a long haul, and there are only so many learned IMF reports and graphs which can be absorbed. 

Participants have turned to movies for solace.

Word is that the Devil Wears Prada 2 with an ageing Meryl Streep, and the crime comedy Horrible Bosses 2 are popular choices. Life doesn’t have to be serious all the time.

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