A modest increase in bank taxes is not the end of the world for lenders | Nils Pratley

As long as Healey doesn’t go overboard, a small turn on surcharge dial will not seriously undermine flow of capital Everyone is familiar with the banks’ plea: raising taxes on them amounts to taxing the nation’s growth. If you increase how much banks pay, goes the argument, less

As long as Healey doesn’t go overboard, a small turn on surcharge dial will not seriously undermine flow of capital Everyone is familiar with the banks’ plea: raising taxes on them amounts to taxing the nation’s growth. If you increase how much banks pay, goes the argument, less interest will be paid on deposits and loans will cost slightly more, meaning we’ll all be worse off eventually. In terms of economic theory, it’s coherent, it should be said: in an ideal world, a chancellor would strive to lower costs of capital at every opportunity.

In the real world, however, John Healey faces multiple competing demands, even from within a business lobby that extends well beyond the banks. As this newspaper revealed last week , the chancellor is likely to increase bank taxes in his budget next week. In the current climate of trying to “stay the course” on the fiscal rules by finding some money from somewhere, tapping the banks is a reasonable policy.

Or, at least, better than most alternatives. Continue reading...