Burnham’s First Budget Puts Britain’s Banks Back in the Tax Debate
By Polly Toynbee4 min read
Andy Burnham’s first budget has placed an old question back at the centre of Britain’s economic debate: should the banking sector contribute more towards the cost of the financial crisis and the public support it received in its aftermath?
The budget, presented as a cautious package of measures, combines relatively modest household relief with wider proposals on public services, electoral reform and economic policy. Among its most closely watched measures is a proposed increase in the tax burden on banks, signalling a possible shift away from the more favourable treatment the sector received under previous Conservative governments.
The debate carries particular weight because of the financial crisis of 2008. British banks required extensive public intervention to prevent a wider collapse of the financial system. Although the government eventually recovered much of the direct financial support through asset sales and other measures, the broader economic consequences were considerably more difficult to reverse. Lower growth, lost output and pressure on public finances continued long after the immediate crisis had passed.
Bank profitability has since recovered substantially. Figures cited in the original report indicate that the four largest British banks recorded combined profits of approximately £13bn during the first half of 2026, representing a 16 per cent increase compared with the same period a year earlier. This has renewed calls for the sector to make a greater contribution to public revenue, particularly at a time when the government faces competing demands for investment in healthcare, social care and employment.
However, proposals to increase bank taxation have encountered resistance from the financial industry. UK Finance has argued that higher taxes could weaken Britain’s competitiveness and encourage institutions to relocate investment to other financial centres. JPMorgan chief executive Jamie Dimon has also previously raised concerns about the implications of additional taxation for the bank’s long-term investment plans in London.
Such warnings have become a familiar feature of Britain’s relationship with the banking sector. During the aftermath of the financial crisis, former chancellor Alistair Darling faced similar pressure when the Labour government introduced a temporary levy on bankers’ bonuses in 2009. According to Darling’s account, Dimon warned that the measure could affect JPMorgan’s investment decisions and its appetite for British government debt. The bank nevertheless continued its UK operations, illustrating the limits of some of the industry’s warnings about relocation.
The controversy has also resurfaced following the release of documents relating to Jeffrey Epstein, which reportedly revealed that former business secretary Peter Mandelson had encouraged Dimon to put pressure on Darling over the proposed levy. The episode has added another dimension to questions about the influence of major financial institutions over government decisions.
The current debate is therefore not simply about the rate of corporation tax. It concerns the balance of power between elected governments and financial institutions whose investment decisions can carry significant economic consequences. Governments must protect the country’s position as an international financial centre, but they must also ensure that major corporations contribute fairly to the public services and infrastructure from which they benefit.
One proposal under discussion is to restore the additional corporation tax surcharge on banks to its previous level of eight per cent, reversing the reductions introduced by Conservative governments. Estimates cited in the original commentary suggest that this could generate approximately £2bn in additional revenue. Supporters of higher taxation argue that the amount would be modest relative to the scale of the economic damage associated with the financial crisis, but that the measure could establish a wider principle of corporate responsibility.
The question of how additional revenue should be spent is equally important. Linking taxation to visible improvements in public services could help explain the government’s approach to voters. Investment in social care, for example, could address long-standing pressures on families and local authorities. Revenue could also support employment programmes designed to help young people who are not in education, employment or training enter the workforce.
The wider budget debate extends beyond banking. Trade unions have continued to advocate higher taxes on wealth and capital gains, while proposals to reconsider the relationship between income tax and national insurance have also attracted attention from economic policy institutions. Meanwhile, changes to workplace rights and trade union access are expected to influence the government’s relationship with employers and organised labour.
For Burnham, the challenge will be to translate the budget’s relatively small measures into a coherent economic direction. Higher taxation on banks may generate revenue, but its longer-term significance will depend on whether the government can balance financial competitiveness with public accountability.
Britain’s experience since 2008 has demonstrated that the stability of the banking system is not solely a private concern. When financial institutions face systemic failure, the consequences extend to taxpayers, workers and the wider economy. The debate surrounding Burnham’s first budget is therefore about more than a tax adjustment: it is about how the costs and responsibilities of the financial system should be share
The budget, presented as a cautious package of measures, combines relatively modest household relief with wider proposals on public services, electoral reform and economic policy. Among its most closely watched measures is a proposed increase in the tax burden on banks, signalling a possible shift away from the more favourable treatment the sector received under previous Conservative governments.
The debate carries particular weight because of the financial crisis of 2008. British banks required extensive public intervention to prevent a wider collapse of the financial system. Although the government eventually recovered much of the direct financial support through asset sales and other measures, the broader economic consequences were considerably more difficult to reverse. Lower growth, lost output and pressure on public finances continued long after the immediate crisis had passed.
Bank profitability has since recovered substantially. Figures cited in the original report indicate that the four largest British banks recorded combined profits of approximately £13bn during the first half of 2026, representing a 16 per cent increase compared with the same period a year earlier. This has renewed calls for the sector to make a greater contribution to public revenue, particularly at a time when the government faces competing demands for investment in healthcare, social care and employment.
However, proposals to increase bank taxation have encountered resistance from the financial industry. UK Finance has argued that higher taxes could weaken Britain’s competitiveness and encourage institutions to relocate investment to other financial centres. JPMorgan chief executive Jamie Dimon has also previously raised concerns about the implications of additional taxation for the bank’s long-term investment plans in London.
Such warnings have become a familiar feature of Britain’s relationship with the banking sector. During the aftermath of the financial crisis, former chancellor Alistair Darling faced similar pressure when the Labour government introduced a temporary levy on bankers’ bonuses in 2009. According to Darling’s account, Dimon warned that the measure could affect JPMorgan’s investment decisions and its appetite for British government debt. The bank nevertheless continued its UK operations, illustrating the limits of some of the industry’s warnings about relocation.
The controversy has also resurfaced following the release of documents relating to Jeffrey Epstein, which reportedly revealed that former business secretary Peter Mandelson had encouraged Dimon to put pressure on Darling over the proposed levy. The episode has added another dimension to questions about the influence of major financial institutions over government decisions.
The current debate is therefore not simply about the rate of corporation tax. It concerns the balance of power between elected governments and financial institutions whose investment decisions can carry significant economic consequences. Governments must protect the country’s position as an international financial centre, but they must also ensure that major corporations contribute fairly to the public services and infrastructure from which they benefit.
One proposal under discussion is to restore the additional corporation tax surcharge on banks to its previous level of eight per cent, reversing the reductions introduced by Conservative governments. Estimates cited in the original commentary suggest that this could generate approximately £2bn in additional revenue. Supporters of higher taxation argue that the amount would be modest relative to the scale of the economic damage associated with the financial crisis, but that the measure could establish a wider principle of corporate responsibility.
The question of how additional revenue should be spent is equally important. Linking taxation to visible improvements in public services could help explain the government’s approach to voters. Investment in social care, for example, could address long-standing pressures on families and local authorities. Revenue could also support employment programmes designed to help young people who are not in education, employment or training enter the workforce.
The wider budget debate extends beyond banking. Trade unions have continued to advocate higher taxes on wealth and capital gains, while proposals to reconsider the relationship between income tax and national insurance have also attracted attention from economic policy institutions. Meanwhile, changes to workplace rights and trade union access are expected to influence the government’s relationship with employers and organised labour.
For Burnham, the challenge will be to translate the budget’s relatively small measures into a coherent economic direction. Higher taxation on banks may generate revenue, but its longer-term significance will depend on whether the government can balance financial competitiveness with public accountability.
Britain’s experience since 2008 has demonstrated that the stability of the banking system is not solely a private concern. When financial institutions face systemic failure, the consequences extend to taxpayers, workers and the wider economy. The debate surrounding Burnham’s first budget is therefore about more than a tax adjustment: it is about how the costs and responsibilities of the financial system should be share
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