IMF Urges UK to Look Beyond Banks for Budget Savings
The fund’s European department pointed to pension and welfare changes, while banking groups warned a surcharge increase could curb lending.
Key takeaways
- The IMF’s Helge Berger urged a focus on spending cuts, including pension and welfare reforms.
- UK Finance research forecast lower GDP and lending if the bank surcharge returned to 8%.
- The UK’s four largest lenders reported £29.2bn in profits during the first half of the year.
The IMF urged the UK to focus on pension and welfare savings rather than higher taxes on banks ahead of this month’s budget. Helge Berger, deputy director of the fund’s European department, said spending cuts could make more sense given Britain’s high tax-to-GDP ratio.
Berger said property tax or VAT reform could be considered if the government needed more revenue. He put the UK tax burden at roughly 40% of GDP, a historically high level for Britain.
UK Finance chief executive David Postings warned against increases in bank-specific taxes. Research commissioned by the lobby group estimated that restoring the bank surcharge from 3% to 8% would leave annual UK GDP £1.2bn lower in real terms by 2029-30. It also projected lending would be £10.4bn lower that year than if the rate stayed at 3%.
TUC analysis of HMRC corporate tax receipts said the Treasury had lost £6bn in the three years since the surcharge cut took effect in 2023. Meanwhile, HSBC, NatWest, Barclays and Lloyds reported £29.2bn in profits over the first six months of the year, with £13.7bn pledged to investors through dividends and share buybacks.
Former banker Philip Augar said a moderate tax increase could raise £2bn to £3bn a year. He argued that banks often threaten to move jobs and investment but rarely follow through.
This article was produced with the help of AI technology. Based on reporting by the outlets listed above.
