The IMF has advised Chancellor John Healey to focus on spending cuts rather than increasing bank taxes to balance the budget.

The International Monetary Fund (IMF) has cautioned Chancellor John Healey against raising taxes on banks to address Britain's fiscal challenges. Speaking at the IMF's annual meetings in Bangkok, deputy director Helge Berger suggested that the government should instead prioritize spending reforms, specifically targeting pensions and social benefits.

IMF Recommendations for Fiscal Balance

Helge Berger, deputy director of the IMF’s European department, noted that Britain’s tax-to-GDP ratio is historically high at approximately 40%. He suggested that if the government requires additional fiscal headroom, it should emphasize expenditure-side measures, such as removing the triple lock on pensions and better targeting social benefits. Berger indicated that while reforming property taxes or broadening the VAT base could be viable revenue-raising options, increasing taxes on the banking sector is not recommended.

Debate Over Bank Surcharge

Chancellor John Healey is reportedly considering reversing a reduction in the bank profit surcharge, which was lowered from 8% to 3% by his predecessor, Jeremy Hunt. Industry group UK Finance has warned that reverting to an 8% rate could reduce annual UK GDP by £1.2 billion by 2029-30 and decrease lending by £10.4 billion. Conversely, the Trades Union Congress (TUC) argues that the Treasury has lost £6 billion in revenue since the surcharge was cut in 2023 and has called for an increase to 16%.