Target pensions or welfare, not banks, IMF tells John Healey
The IMF has urged John Healey to focus on pension and welfare spending cuts rather than raising taxes on banks in the upcoming budget. Its view is that Britain already has a high tax burden, while supporters of a bank tax argue lenders can afford to contribute more after strong profits and taxpayer support during the financial crisis.
IMF deputy director Helge Berger said the government could also consider property tax or VAT reform if it needs more revenue, and pointed to the pensions triple lock and better targeting of social benefits. UK Finance says reversing a cut to the bank surcharge could leave annual GDP £1.2bn lower by 2029-30 and reduce lending by £10.4bn; TUC analysis says the cut has cost the Treasury £6bn over three years. The four largest UK banks reported £29.2bn in profits in the first half of the year, while former banker Philip Augar said a moderate tax rise could raise £2bn to £3bn annually.
- IMF urges pension and welfare savings over bank taxes.
- UK Finance warns higher levies could reduce lending and GDP.
- The four biggest banks made £29.2bn in half-year profits.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
The IMF’s case is that Britain already has a high tax burden, so further raising taxes on banks could discourage lending and weigh on economic growth. If the budget needs savings or revenue, restraining pension and welfare spending, better targeting benefits, or reforming property tax or VAT may be more sustainable ways to protect public finances.
The case against
Banks have reported substantial profits, and advocates of a higher bank tax argue that lenders can afford a larger contribution, particularly given past taxpayer support during the financial crisis. They also point to estimates that restoring the surcharge cut has cost the Treasury £6bn over three years, while a moderate rise could raise £2bn to £3bn annually, and argue that pensioners and welfare recipients should not bear the main burden of budget savings.