Healey tells Bailey to loosen bank rules as quickly as possible after tax hike

John Healey has asked Bank of England governor Andrew Bailey to loosen banking regulation “as quickly as possible”, days after his Budget doubled the surcharge on the sector to six per cent. In his annual remit letter to the Financial Policy Committee, the chancellor said the regulatory framework must be “internationally competitive” and should “support, rather than unduly constrain, investment in the UK economy”.

The letter calls on the FPC to speed up changes to bank capital rules, strip out overlapping requirements and relax borrowing caps to boost mortgage lending and home buying. Healey said he expected the next stage of the review to bring further proposals, “in particular to address overlaps identified in capital requirements related to domestic exposures”. The FPC is due to publish its Financial Stability Report in November, which is expected to drive the structural changes.

The direction sits awkwardly beside the Budget's tax rise. The surcharge increase, lasting 15 months, is expected to raise an additional £1.5bn and sets banks' effective corporation tax rate at 31 per cent. JP Morgan said the move “singles out” the industry and “lacks principle”, while Lloyds finance chief William Chalmers called extra taxes “unhelpful” to UK growth and competitiveness.

The Office for Budget Responsibility warned the higher rate could cost about £190m in receipts as some banks move profits out of the UK, adding that the total consequence is “uncertain”. The revenue is earmarked to fund a £100 payment to 20m households towards winter energy bills. Healey said his message to banks was that they were “such an important part of this country and its future”, but he was asking them to help with the costs that households need to help get through the winter.