Conservatives warn against Burnham bending to the left with budget raid on banks

• Conservatives sound the alarm over reports Labour will hike taxes on financial services

• Burnham and Healey must not stifle growth by bending the knee to Labour's left-wing backbenchers and trade union paymasters

• Badenoch visits a leading financial services business in Edinburgh

The Conservatives will today [Thursday 15th October] sound the alarm over reports that Labour will hike taxes at the Budget, including on the financial services sector.

Kemi Badenoch will visit a leading Scottish financial services firm in Edinburgh, where she will hear about the challenges already facing the sector thanks to Labour, and discuss the potential for growth under a more pro-business Government. The sector contributes £17.7 billion to Scotland and employs around 157,000 people and over a million people across the UK.

In Westminster Labour are in retreat, with Cabinet ministers including the Deputy PM having talked up the prospect of a Capital Gains Tax hike at the Budget before briefing that they will not be equalising it with Income Tax after all. The Chancellor has also reportedly dropped plans to expand the so-called 'Mansion Tax' after the Conservatives pledged last week to scrap the new levy on homes altogether. Reports suggest he is instead considering a raid on banks, by increasing the special higher tax rate banks already pay on their profits. On Monday, six Labour MPs introduced an Early Day Motion in Parliament calling for a windfall tax on banks, and it has been signed by 15 more of their colleagues.

Any such measures would be hugely damaging. The UK banking sector already faces a higher effective tax rate than any other major global financial centre - 46.5%, compared to 39.1% in Frankfurt and 27.9% in New York, according to UK Finance. British banks are subject to sector-specific taxes including a corporation tax surcharge and the Bank Levy, in contrast to competitor jurisdictions who do not charge bank-specific taxes including the US, Switzerland, Singapore and the UAE. Increasing the bank surcharge risks making the UK an even less competitive place for global finance.

Businesses have already been hammered by Labour's Jobs Tax, business rates raid, and employment red tape, which have sent costs soaring and wiped out many firms' profit margins. Adding yet another burden on their shoulders would be disastrous.

Our entire economy depends on financial services. Every business with a card machine and every family with a bank account relies on banks to move money around. Many businesses rely on banks to provide them with the credit they need to invest, create jobs, and grow while millions of families' homes depend on mortgages provided by banks. An attack on the sector will have implications for everyone.

The intervention comes as the International Monetary Fund (IMF) warns Governments against high spending amid rising inflation and instability in global bond markets. Chief Economist Silvana Tenreyro said that the increase in borrowing costs and its implications for fiscal sustainability make the need for fiscal adjustment all the more urgent.

These anxieties pervade Labour circles too. Last week, Andy Haldane, an informal adviser to Burnham, said the Government is skating on pretty thin ice and must be prepared to take the knife to public spending. He added that the private sector feels taxed out. And former Burnham advisor Jim O'Neill said Healey must not do any harm to the economy by raising taxes, including by launching a raid on the banks. 

Andrew Griffith MP, Shadow Chancellor, said:

The last two Labour Budgets were disastrous, adding £66 billion in taxes onto families and businesses. John Healey must not make the same mistake as his predecessor Rachel Reeves.

Britain needs growth. But a raid on the financial services sector will stifle it. Labour should be backing businesses and wealth-creators, not making their lives even harder.

Rather than hiking taxes yet again, Labour should cut spending. Conservatives are the only party that will cut the welfare bill, cut the deficit, cut taxes and get Britian working again.

Richard Fuller MP, Shadow Chief Secretary to the Treasury, said:

Britain cannot afford another Labour Budget that hikes taxes on businesses in a bid to appease the party's own left flank.

Much of our economy is already taxed out' and any further tax raids will just end up damaging growth, with serious consequences for hard-pressed families.

John Healey must rule out any more tax rises and focus instead on getting  spending and the welfare bill under control."

Harriet Cross MP, Shadow Scotland Secretary, said:

Scotland's financial services sector is critical to our economy. The same is true for the UK as a whole.

Labour might see the banks as an easy target for an ideological tax raid. But the truth is that any such tax hike will only compound the damage Labour have already done to businesses, with serious implications for growth and therefore for the public too.

Instead of hiking taxes, Labour should instead be focused on getting spending under control so they can invest in our defence, cut taxes and back businesses to deliver a stronger economy and stronger country.

ENDS

Notes to Editors:

John Healey is reportedly considering a range of tax hikes on banks:

• HM Treasury is reportedly considering a range of tax rises on banks, including a windfall levy on bank profits. The Financial Times reported that John Healey told financial institutions that he faces a challenging fiscal picture' and that he is considering a range of tax rises on banks, including a windfall levy on bank profits. The Telegraph also reported that Healey is considering a one-off windfall tax on banks, modelled on the Energy Profits Levy (The Financial Times, 6 October 2026,link; The Telegraph, 3 October 2026, link).

• Analysis by PwC for UK Finance found that the UK banking sector faces the highest tax burden of any major global financial centre. The analysis found that the tax burden for a model corporate and investment bank in 2026 is 46.5 per cent in London, 42.2 per cent in Amsterdam, 39.1 per cent in Frankfurt, 29 per cent in Dublin and 27.9 per cent in New York. Banks in the United Kingdom are subject to specific taxes including the Bank Corporation Tax Surcharge and the Bank Levy (UK Finance, Press Release, 23 September 2026, link).

• On 12 October 2026, six Labour MPs sponsored an Early Day Motion which said the Government should introduce a tax on bank windfall profits'. Richard Burgon, Rebecca Long-Bailey, Bell Ribeiro-Addy, Neil Duncan-Jordan, Cat Eccles and Kim Johnson sponsored the EDM. The EDM said: recognises that the Government rightly applied a windfall tax to the super-profits of oil an gas companies; believes that the same principle should apply to the banks; and further believes that the Government should introduce a tax on bank windfall profits'. Sixteen other Labour MPs signed to support the motion (UK Parliament, EDM: Taxation of bank windfall profits, 12 October 2026, link).

The banking sector is a significant contributor to the Scottish economy:

• The financial services sector employs 157,000 people in Scotland and contributes £17.7 billion to the economy (equivalent to 12.7 per cent of GVA). Scottish Financial Enterprise (SFE) reported that 157,000 people are employed in financial services in Scotland in 2026, an increase of 15 per cent since 2023. SFE also said the sector contributes £17.7 billion GVA to the economy, equivalent to 12.7 per cent of GVA across the whole economy. Edinburgh is ranked 28^th on the Global Financial Centres Index and Glasgow 43^rd (SFE, Press Release, June 2026, link).

• Silvana Tenreyro, Chief Economist at the International Monetary Fund, said it is urgent' that governments become more fiscally sustainable. TENREYRO: Primary deficits have remained elevated and, in many countries, are significantly higher than before Importantly, the increase in borrowing costs and its implications for fiscal sustainability make the need for fiscal adjustment all the more urgent' (The Times, 13 October 2026, link).

John Healey has ruled out two tax hikes already:

• John Healey has ruled out equalising Capital Gains Tax with income tax. The Financial Times reported that four individuals close to the Chancellor said that Capital Gains Tax would not be equalised with income tax at the Budget (The Financial Times, 13 October 2026, link).

• John Healey has ruled out cutting the Family Homes Tax threshold. The Financial Times reported that John Healey will not reduce the Family Homes Tax (High Value Council Tax Surcharge) threshold from £2 million to £1.5 million (The Financial Times, 11 October 2026, link).