One of the world’s largest banks threatened to leave the UK if the government increased tax on banks at last year’s autumn budget, openDemocracy can reveal.
The head of US banking giant JP Morgan Chase (JPMC) was among several industry leaders to personally meet with Rachel Reeves last autumn, amid speculation that the chancellor planned to raise tax on banking profits to help fill a £22bn “blackhole” in public finances.
In the end, the tax hike did not materialise. The government has since announced a range of cuts to tackle the funding shortfall, including slashing departmental budgets, disability benefits and the winter fuel allowance for pensioners.
Now, documents obtained by openDemocracy show that a representative of Jamie Dimon, the CEO of JPMC, wrote to Reeves after the meeting to say the bank would consider moving parts of its business abroad if taxes increased.
This latest example of lobbying fits into a broader pattern identified by a range of experts, who warn that Keir Starmer’s Labour government is prioritising the financial services sector and acceding to its demands at the cost of the wider economy and the most vulnerable in society, who are seeing vital services cut.
Experts fear that the more the government does to facilitate the sector, the more reliant on it the UK’s economy becomes. This, in turn, furthers financial institutions’ influence and leverage, allowing them to push for even more favourable policies and treatment.
“By making growth the precondition of all other reforms, Labour has left itself dependent on private investors,” said Sahil Dutta, a researcher of finance and political economy at City St George’s university in London. “Whether that’s developers, private equity funds, or conglomerate banks, it means further inflating the financial sector and its outsized influence.
“It is well established that once financial sector growth gets too big, it is a drag on wider society – and indeed economic growth.”
JPMC declined to comment. A Treasury spokesperson said: “The difficult decisions we took at the autumn budget mean stability has been restored, interest rates have been cut four times, NHS waiting lists have fallen, and UK growth is the fastest in the G7. That’s how our Plan for Change is putting more money into people’s pockets.”
‘Reviewing where business is booked’
In early September 2024, several credible reports in the media suggested the banking industry was braced for tax rises. The Labour Party had taken office months earlier, and Reeves was vocal about the need to plug a massive gap in the nation’s finances.
Campaigners have told openDemocracy that, at the time, they were hopeful that the autumn budget would include some form of tax increase on banks, which have enjoyed bumper profits in recent…
Read More: JP Morgan told Rachel Reeves the bank would leave UK if taxes increased
