by Sinead Cruise

LONDON (Reuters) – British banks are stepping up their lobbying against possible tax rises in the new Labour government’s first budget, fearing it will use the sector to help fix public finances, industry sources told Reuters.

While neither the prime minister nor his chancellor Rachel Reeves have publicly said that banks should pay more tax, Keir Starmer’s recent reference to the burden falling on those with “broader shoulders” has fuelled concerns, three sources said.

Rachel Reeves is due to meet senior industry officials in the coming days, and bankers expect a tax increase on bank profits to be discussed, two of the sources said.

A third source said JP Morgan Chase CEO Jamie Dimon would meet Rachel Reeves in London on Wednesday for a mutually arranged engagement.

A Treasury spokesman said he would not comment on “speculation about tax changes outside of a fiscal event.” He did not immediately respond to a request for comment on Reeves’ discussion with Jamie Dimon.

The sources, who declined to be named because of the sensitivity of the issue, said they expected the Treasury to seek to boost an existing surcharge that banks already pay.

The sources said it was the easiest way for Reeves to tap the sector to plug a £22bn (€26.09bn) hole in the public finances in her October 30 budget.

This would be easier than reducing the amount of interest British banks earn on reserves deposited at the Bank of England, which could distort the effects of its monetary policy, they added.

HSBC, Britain’s largest bank, in February posted a 78% rise in 2023 pre-tax profit to £30.3bn, and rivals including NatWest Group and Barclays posted similarly robust results.

British bank shares fell briefly last week after the Financial Times quoted an unnamed former official arguing for a “carefully designed” levy on banks.

The UK bank tax was introduced in 2011 to curb excessive risk and reckless growth in the wake of the global financial crisis.

( Nicolas Delame, edited by Blandine Hénault)

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