Will John Healey tax the banks?

0:05Hello and welcome to Coffeehouse Shots. I'm Noah Hoffman and today I'm delighted to be joined by James Heal and Michael Simmons. First on the agenda, let's head back to Bangkok where John Healey is at the IMF and at the same time we are starting to have the drip drip drip phenomenon of budget leaks. The big one this morning is a banking tax. Michael, tell us all about it and what the implications are. Yep. So as you say, we've gone from, I think I've been complimenting John Healy for not doing the Rachel Reeves of letting all the stories come out before the budget. But that seems to be out the window because earlier in the week, the Treasury let it be known via the pages of the Financial Times that they weren't going to equalize capital gains tax with income tax, which will be a relief to investors everywhere.

0:58But bad news this morning, as you say, for the banks, because the banks seem to think that tax is coming. And I think The Guardian has got this sort of confirmed off the record from the Treasury that there's going to be an increase to the bank taxes. This is something that the trade union movement has been calling for a long time on the grounds that if you look at the biggest four banks together, they've made 15 billion pounds in profit in the first six months of the year. So when we're in a situation where businesses are taxed to the hilt, where Labour have ruled out increasing taxes on workers, even though they're doing that anyway through a fiscal drag, then politically the banks seem like a sensible target.

1:40It's worth saying, though, the banks already pay pretty high taxation. They obviously pay corporation tax. They pay a 3 % kind of surcharge on top of that. They also pay a levy on the assets that they hold on their balance sheet. None of the stories have it particularly clear what the increase is going to be. I think the obvious one, if you were going to increase the bank taxes, is this corporation tax surcharge, which was 8%. Rishi Sunak reduced it down to 3%. 2023. Exactly. So I think if you bring that back up, you get two billion pounds. And I think politically, that's pretty easy for Labour to do, right?

2:18If they do need to raise taxes at this budget. I think it would be a mistake, though, because if I can cast readers minds back, one of the cover stories we did earlier this year was about this Feistian bargain, as a treasury source described it to me, that Rachel Reeves, the previous chancellor, had with the banks. And You probably couldn't think of a chancellor in the history of this country more despised by businesses than Rachel Reeves because of various tax things. But that didn't extend to the city of London. You know, Jamie Dimon from JP Morgan was always having, you know, smiley, handshaking photos with her.

2:57And you would never get people from banks on the record criticizing the government. You know, sometimes they would even put press releases out basically saying they were happy with the budgetary measures. And this is kind of a bargain that's existed in the Treasury pre the Labour government, but continued into the Reeves government that was basically said, this is one part of the British economy that works staggeringly well. It grows, you know, we're a world financial centre. If we're doing things that are disliked by the more wider general business community, then let's not touch the city of London and keep those people on side.

3:35I think that actually was quite a smart move for Rachel Reeves to keep going. It's one of the few things I think she got right because you were getting this wave of criticism, but actually you had these massive international corporations kind of on your side. and actually at little political cost to you because these taxes and the way the City of London works is like so complicated. I don't think many voters were clocking what we wrote in that cover piece that actually she had this cosy relationship with the banks. If these reports are true, it seems that Andy Burnham and John Healy don't have that calculation and they're going to say, no, to hell with it.

4:13Let's tax the banks. And as I say, I think that could backfire. I think I remember discussing this on the podcast in 2023 when Rishina cut this in that budget. Look, I think that this is some simple way that they can raise taxes. It's not going to affect many Labour voters. They're looking for at least painless taxes. This would appear to be one of them. And this is the kind of emblematic of the approach to the British economy we've had over the past few years. Bit of tinkering, not much of a long term plan. It's the obvious thing to do. I think there was a lot of history coming back this week with John Healy out in the IMF and the IMF giving some rare words of praise saying he just stayed the course on this deficit reduction why does that bring back history?

4:46Well of course 50 years ago it was the IMF lording Dennis Healy his namesake for what he was doing and I think there was a poll I think it was in The Economist top five chancellors in the world and Dennis Healy came top and he was the only one that wasn't belonging to a dictatorship and as he made the point unlike the others he did not have sort of electricals he could wire up to people's ghoulies etc and similarly John Healy has not got that sort of power in the budget, mercifully for us all. But one of the things he can do, to provide a bit of shock therapy, as it were, is trying to raise taxes in this kind of way.

5:13I think overall Labour thinks it's going to cost about£2 billion or so, have to find£12 billion to fix the black hole from the Iran war. And it would strike me that this is the obvious thing to do. Can I just say on that point that I actually think in the last few days, there's a bit of an idea emerging that this black hole might not be as bad. And this is because, James is totally right. There has been a dent put in the public finances by the Iran war, you know, what it's done to energy prices, blah, blah, blah, blah, blah, government borrowing costs. Some people I've been speaking to with knowledge of this recently think that the OBR could revise their estimations or predictions for wage growth in a way that's helpful to the government.

5:55and if that happens that might kind of go the other way on the black hole which might give you a bit of space to potentially i don't think this is likely but i think it's now possible combine that with your bank tax you might suddenly have a bit of money for some kind of giveaway and to me the two obvious ones are you either surprise everyone and fund your three percent of defense spending or going to what james was saying about the deficit reduction you make that actually plausible because as we said on the podcast the other day it's based on fictional spending plans about spending cuts and tax rises at the end of the parliament could you put a stop to that at this budget gosh that would really be a rabbit out of the hat if um john healy you know announced a pathway to three percent of gdp because we're not expecting that till next year but i just want to really quickly ask you michael lobbyists for um the city and for the banks are saying that raising taxes on their industry will cost the economy 20 billion pounds do you buy that um i'm not sure if i buy um the 20 billion but i mean they're generally right that the the way that you know the treasury calculates these things and goes oh you know the tax rate is x put it up by x plus 10 we'll get 10 more that's not how it works you know there's there's dynamic effects they will it It disencourages them growing their businesses.

7:11It slows things down. I think this probably would raise money in the short term or certainly in the five years that it matters for the OBR. I mean, otherwise John Healy wouldn't be considering doing it. But the banks are right that over the long term, this does not net life changing amounts of money. Let's turn to Scotland now where the SNP party conference is ongoing. It just feels like conference season never ends. James, John Swinney is harping on about a second independence referendum. And how fair is it to take the piss out of him for this? I think it's very easy and fun to. I remember being a junior reporter at the Scottish Jail Mile, bursting in when Stedger made a big speech, oh my God, this is it.

7:58And the jaded political editor, Michael Blackley, turned to me and said, this has happened about five or six times before. Look, it's an SNP party conference. Of course, we're going to talk about independence. But much of this stuff is to be expected. There doesn't seem to be a conventional plan. Obviously, they won re-election against the odds earlier this year. Extraordinary, they've now been in government for 17 years, and they're obviously going to outlast the kind of extraordinary 18-year period that the Conservatives handed on Thatcher and Major. But there hasn't been a huge amount of stories coming out of it.

8:22It coincides with the time that Andy Burnham's up in Aberdeen. And it's interesting, isn't it, having Andy Burnham as a new prime minister? What does that mean? There was obviously that moment in his conference speech where he very much called John Swinney for having a pop at him on the day his dad died. There are some in the SNP who suggest to me that they are a bit more concerned about Burnham being a kind of more recognisably national figure in some respects in some ways than Keir Starmer was. That being said, I think it is quite telling how Labour in terms of its leadership is much less Celtic than it once was in terms of composition, very different from what it was 30 years ago.

8:53You know, 30 years ago, you had much of the leadership was led by great figures of Scottish Labour. those figures are now diminished both within Parliament and outside it. There are just less seats in the UK which are held by Labour in Scotland and Wales. And I think it was quite striking that Anasawa has now come south. Obviously you've got a few people like Douglas Alexander at the top of the party but I think it very much leans into this point about how we're going to have regional battles across the country when it comes to the next election. And obviously we had the declaration a few months ago about the three nationalist first ministers working together.

9:21I'm not particularly expecting anything. It's just going to be one of those things I think it's going to bubble on in the background. And I think the Conservatives are feeling pretty chippy about potentially if the Constitution should does rear its head, making some gains, as they saw from Douglas London's by-election success earlier this year. Let's turn now to reform. We are in the midst of the second sting the party is to experience. Well, you want to call it fourth sting in the sense that there was the 2019 Brexit Party one, there was the 2024 Andrew Parker Channel 4 one, there was 2026 Channel 4 one, and now we've got a third one on ITV.

9:51Yes. But the second for reform in its current iteration. Yeah, this year. This year. Right, so the latest revelation is sort of an undercover video of Sarah Potchen basically saying that there's a misogyny problem within the party, and that comes on top of other videos of sort of low-level counsellors making racist and sexist remarks. James, my experience of the Reform Party is that it is a bit of a boys' club, and so the Sarah Potchen revelation doesn't come as a huge surprise to me, but I'm keen to hear your reflections. Yeah, I think that that in some ways is the most telling comments, I think.

10:32Sarah Fetch in making comments to an undercover journalist at the staff Christmas party, which I believe was at the Hippodrome last year. They had a giant ice sculpture with a reform logo melting slowly in the background, almost like the pole lead, I suppose, in one sense. But those comments, I think, will be used against them. But overall, I don't think this is on the scale of the Channel 4 thing. That was two very, very senior aides at the top of the party being involved in allegedly suggestions around lawbreaking. These are, frankly, some very unknown people, local councillors, how best do you kick them out?

10:59And I think if you look at how parties treat these, there's no, frankly, easy way to deal with some of these nasty comments, etc. There'll be similar conversations that went on with the Conservatives and Labour. I suppose the question is, you know, is reform adequately vetting? And it goes back to the question of recruitment, which has always been the thing for Nigel Farage's parties at the top of the party. And, you know, is it, again, the sign that they can't get back on the front foot? It does seem that, you know, they've always had the ups and downs. They've always had some being on sometimes the back foot, sometimes the front foot.

11:26But right now it just seemed a barrage of stories about them. And they seem to have been unable to pull themselves out of their tailspin. It's worth saying as well, as bad as some of the recorded comments are, we all see party activists from all the different parties at all the conferences. As a rule, they're all freaks. Absolutely. And do you know what? If an undercover reporter went into pretty much any party, they would find material. I don't know if it would necessarily target the same groups. For instance, in left-wing parties, it would more likely be anti-Semitic. In right-wing parties, perhaps it would be like anti-Muslim sentiment.

12:00There is no party that is clean of these types of people and these types of views, I would argue. I think also it's quite interesting that the person who was the undercover journalist, I think I met her at the pub once and I bought her a drink. because I'm actually putting an expense claim in. Oh, when's that video coming out? Into ITV. No, don't worry. I think it was pretty anodyne from what I can recall. But I think it's just another thing about the pathology and reform. And sometimes you listen to people like Zia Yusuf talking about infiltration within the party and you can be a bit sceptical of that.

12:28But it does show the difficulties of bringing people in when you're an expanding party. And sometimes, you know, journalists are out to get them. But of course, they've got a big target on the back. Their reform is a red rag to the journalistic bull and they've got to get used to it. Do you think off the back of the Sarah Potchen segment, reform might put in a bit more effort to make the party at the risk of using a cringe term women friendly or appealing to women? So, I mean, I've said this to them before and I interviewed Robert Jenrick for Politics UK and he sort of brushed it off as though I was being some sort of blue haired woke a teriyat member.

13:04Sorry, let's just repeat that. Blue haired woke a teriyat member. Yeah, sort of, you know, I sound like Jonathan Gullis, yeah. Chai latte drinking, avocado eating. But he sort of gave me a brusque response. And I did say, well, look, Robert, you know, last summer, 2025, you'll need to launch Women for Reform. And it's not sort of, I don't know, the antithesis of conservatism to launch voter outreach groups. And they did have a big push last summer. But I think that goes back to the critique that Tim and I constantly make on this podcast, which is that it did feel like last summer was all behind you, Nigel.

13:33They were trying to have this big tent. And now it does seem like we're going to double down on our worst behaviours. obviously Sarah is one of only two women in reform they have got Sola Bravman I'd be interested to see what Sola Bravman says on this but I think that there is a blocusness in reform that can sometimes tip into some unpleasantness and I think that if they were sensible they would try and correct that impression and make the point that actually they do want to stand up for it and it was a big thing actually women's safety was something that Franja was thinking about the question is then it comes are you going to for instance let James McModork back into the party given the allegations about his past behaviour really interesting and we will continue to look closely into that subject as well as the others discussed with the budget creeping ever closer.

14:12So on that note, thank you, Michael. Thank you, James. And thank you for listening to Coffeehouse Shots.

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