Chancellor holds showdown talks with banks amid fears of Budget tax raid to help fill black hole in nation's finances

Published: 07:51 EDT, 6 October 2026 | Updated: 08:16 EDT, 6 October 2026 Chancellor John Healey met with banking bosses today after facing warnings not to hike the tax burden on the sector at this month's Budget.Ahead of his first fiscal showpiece on 28 October, Mr Healey is having to find nearly £5billion to fund the Government's Defence Investment Plan.His fiscal headroom is also said to have halved to around £12billion due to the impact of the Iran war and rising cost of public borrowing.Mr Healey has faced calls by trade union leaders for a tax raid on banks to fund a cut to energy bills this winter, and as the Chancellor grapples with the parlous state of the nation's finances.But, ahead of their summit with the Chancellor on Tuesday, banking chiefs were revealed to have mobilised to intensify their opposition to higher levies.Treasury sources would not confirm who attended this morning's talks, although the bosses of Lloyds Banking Group, Barclays, HSBC and NatWest Group had all been expected to sit down with the Chancellor. Chancellor John Healey met with banking bosses today after facing warnings not to hike the tax burden on the sector at this month's Budget It was reported last week that some of Britain's leading business groups were circulating a letter to send to the Chancellor to warn against increasing the tax burden on the banking sector.A draft version seen by Sky News said: 'While we recognise the challenging fiscal pressures facing government, it is important to note that our industry already faces a higher tax burden than our key international competitors.'Further increasing that burden through any additional sector-specific measures would make it harder to channel finance and liquidity into businesses trying to invest and grow in the UK.'As well as weakening investor confidence and damaging UK attractiveness, a higher tax burden may not necessarily generate higher tax receipts if capital, people and businesses move elsewhere.' JP Morgan chief executive Jamie Dimon has previously warned against hiking the surcharge on banks' profits, saying it could push investment to other countries.And some Cabinet ministers are said to have warned that a raid on the sector later this month will threaten Prime Minister Andy Burnham's promise of economic growth.Tax paid by the banking sector increased by 8.5 per cent to £39.1billion in the 2025-26 tax year, compared with the previous year, HMRC figures show.Receipts from the surcharge, which banks pay on their profits, jumped by a fifth year-on-year, largely because profits across the industry have risen.The surcharge is levied at a rate of 3 per cent but the Trades Union Congress is among those calling for that to rise to at least 8 per cent, which it said would raise £9billion for the Treasury over four years.A Treasury spokesman said: 'As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.'