UK’s biggest banks warn Andy Burnham against ‘damaging’ windfall tax

Britain’s biggest banks have warned Andy Burnham against introducing a “damaging” windfall tax on the UK’s finance industry.

In a letter on Thursday, lobby group UK Finance warned the Government that increasing the current levies placed on the sector would threaten to undermine Mr Burnham’s plan to deliver “growth in every postcode”.

There is fresh speculation that John Healey, the Chancellor, could launch a fresh raid on bank profits in his maiden Budget on Oct 28.

However, UK Finance said it was “concerned that increasing taxes on banks would ultimately risk undermining the very tax base the Government seeks to protect and grow, as well as damaging the UK’s international competitiveness”.

The letter added: “While fully recognising the fiscal pressures facing the Government, raising what are already high sector-specific taxes would run counter to the wider growth agenda.”

The warning follows calls from the Green Party for a new 38pc windfall tax on all bank profits more than £800m.

The policy is aimed at raising £19bn for the Treasury to lower National Insurance costs for small businesses.

It emerged earlier this week that Jamie Dimon, the chief executive of JP Morgan, had warned Mr Healey that raising taxes on UK banks could trigger staff to move abroad.

Mr Dimon reportedly told Mr Healey that higher taxes in London had contributed to jobs moving away from the city.

Sir Howard Davies, the former chairman of NatWest, has also cautioned Mr Burnham against the move, telling The Telegraph last week that new bank taxes risked sending banking activities abroad.

British banks already pay one of the highest tax rates in the world at nearly 47pc, according to UK Finance.

In Amsterdam, the rate is 42pc, while Frankfurt charges 39pc and New York charges 28pc.

The taxes include a 3pc corporation tax surcharge on profits of more than £100m, plus a levy on the value of their assets.

Germany is planning to lower corporation tax by 1pc each year between 2028 and 2032, which could make Frankfurt more attractive, the letter says.

Banking accounts for more than £1 out of every £25 of the UK’s economic output, UK Finance claimed.

It added: “At a time when peer jurisdictions are seeking to improve their competitiveness, it is vital that the UK’s approach to both tax and regulation pull in the same direction, supporting investment and the sector’s capacity to finance growth across the economy.”