![\"Heather](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/10\/1792150213_895_Heather_Stewart,_L.png\")
Heather Stewart<\/p>\nIMF: UK should cut spending rather than raise taxes on banksHeather Stewart<\/p>\n
Heather Stewart is the Guardian\u2019s economics editor, reporting from Bangkok this week:<\/p>\n
We\u2019ve just been in the IMF\u2019s Europe press conference, where the topic of bank taxes in the UK<\/a> came up [following our report that the chancellor is poised to tax Britain\u2019s banks].<\/p>\n Asked about the possibility at John Healey\u2019s upcoming budget, Helge Berger, the economist who is deputy director in the IMF\u2019s European department, suggested there might be better places to look to balance the books.<\/p>\n Berger pointed out that Healey\u2019s predecessor, Rachel Reeves, had raised taxes in her budgets, saying:<\/p>\n double quotation mark\u201cThe last two budgets involved increasing government revenue, and ultimately there\u2019s a moment where this becomes less productive but there\u2019s still areas where Britain can make additional headroom available: modernising the property taxes or VAT, these are good examples. We wouldn\u2019t recommend labour tax.\u201d<\/p>\n Berger added:<\/p>\n double quotation mark\u201cUltimately, with taxes roughly at 40% of GDP – historically, for Britain, a high number – then of course balancing these measures on the fiscal side, doing a bit more there, makes good sense.\u201d<\/p>\n He pointed to cost-cutting measures including removing the pensions triple lock<\/a>, and \u201cbetter targeting social benefits,\u201d adding, \u201cso I think that\u2019s where you would put the emphasis, rather than the tax that you mentioned.\u201d<\/p>\n Share<\/a><\/p>\n Key events<\/p>\n IG have spotted that UK traders are increasingly betting against the big four British banking stocks ahead of the Autumn Budget.<\/p>\n Data from their trading platform shows that the number of short trades across the big 4 banks increased by 58% week on week.<\/p>\n Barclays saw the sharpest increase in selling activity, with short trades jumping 81% week-on-week.<\/p>\n Share<\/a>XTB: Bank tax could hurt FTSE 100<\/p>\n Higher taxes on banks could have an impact on the FTSE 100 since the banking sector makes up nearly 20% of the UK blue chip shares index, says Kathleen Brooks, research director at XTB. <\/p>\n double quotation markThe UK\u2019s banking sector has been extremely resilient this year and has performed positively, for example Lloyds Banking Group is higher by 20% in the past 12 months. The risk is that downward pressure will now build, and this will dim the attractiveness of the entire index.<\/p>\n We will need to wait for the Budget to get the details of this tax, afterall, this is the Labour Party and they are well known for their U-turns. The Chancellor may need to water down plans for a tax if he wants to avoid denting both the economy and the FTSE 100.<\/p>\n Share<\/a>IMF Managing Director Kristalina Georgieva performs a Thai traditional greeting during the Annual Meetings Plenary at the 2026 Annual Meetings of the IMF and the World Bank Group in Bangkok, Thailand. Photograph: Rungroj Yongrit\/EPA<\/p>\n Back in Bangkok, IMF chief Kristalina Georgieva has warned that the risks of artificial intelligence may exceed its opportunities if no adequate safeguards and ethical framework are put in place.<\/p>\n During a panel discussion that included Anthropic co-founder Jack Clark, Georgieva said AI was already strengthening the global economy, but could also deliver negative shocks if it failed to deliver major productivity gains as quickly as hoped, Reuters reports.<\/p>\n Georgieva says:<\/p>\n double quotation mark\u201cIf there are no safeguards, then the risks may exceed the opportunities. And above all, we do need an ethical foundation, and I\u2019m not sure we are there as a society.\u201d<\/p>\n Share<\/a>Pound at three-week high<\/p>\n The pound has touched its highest level against the US dollar in over three weeks.<\/p>\n Sterling has gained half a cent to $1.3335, its highest level since 23 September.<\/p>\n Traders are expecting the Bank of England to raise interest rates in November \u2013 higher rates are typically good for a currency\u2019s value.<\/p>\n Investors will also be weighing up the impact of the budget later this month \u2013 and wondering whether John Healey will maintain the UK\u2019s fiscal headroom \u2013 the buffer for meeting its borrowing rules.<\/p>\n Matthew Ryan, head of market strategy at global financial services firm and FX specialists Ebury, says:<\/p>\n double quotation mark\u201cThe question that matters most to us is how the budget could affect the pound and the gilt market.<\/p>\n We see the fallout in markets as dependent on whether Healey can keep the economic damage to a minimum, while convincing markets that future spending plans won\u2019t come at the expense of debt sustainability.\u201d<\/p>\n Share<\/a><\/p>\n Pensioners could suffer if the government hikes taxes on banks, points out Russ Mould, investment director at AJ Bell:<\/p>\n double quotation mark\u201cThe government might argue that banks are doling out significant amounts of money in dividends to shareholders, implying there is plenty of scope for them to pay a little bit more tax. The flipside is that any hit to dividends to offset higher taxes would penalise the large number of people in retirement who invest in banking shares for income.<\/p>\n Share<\/a><\/p>\n No sign of a rebound in UK bank shares yet \u2013 Lloyds (now down 2.2%) are still the biggest faller on the FTSE<\/a> 100, with NatWest now off 2%.<\/p>\n Share<\/a><\/p>\n In other banking news, the UK government reportedly tried to persuade UBS to shift its headquarters and stock market listing to London in the event of the bank relocating out of Switzerland.<\/p>\n The FT has the story<\/a>:<\/p>\n double quotation markRachel Reeves pitched London as a potential new home for UBS in discussions with the bank\u2019s chair Colm Kelleher during her time as chancellor, according to people briefed on the talks.<\/p>\n The pair discussed the possibility of UBS moving its legal headquarters and listing to the UK if it were to redomicile, the people added, with the most recent meeting taking place earlier this year.<\/p>\n Share<\/a><\/p>\n Will Howlett, financials analyst at Quilter Cheviot, points out that the jump in bank profits means tehy can absorb higher taxes.<\/p>\n He also suggests that higher bank taxes are already \u2018priced in\u2019 to the company\u2019s share prices, saying:<\/p>\n double quotation mark\u201cWith the runup to the Budget and the rumour mongering that comes with it now in full flow, the government seems to be giving the UK\u2019s banking sector some mixed messages. John Healey has called the UK\u2019s banks a \u2018jewel in the crown of the economy\u2019, yet briefings suggest they are going to get hit by a fresh increase in the levy on its profits.<\/p>\n \u201cThe banks did manage to escape such measures last year, but with higher interest rates now expected for longer, the government may be thinking now is the time they can strike, especially if they want to limit the number of personal taxes they go after at the budget. The government is facing increased fiscal pressure as a result of the Middle East shock, and while economic growth is solid just now, this would appear easier pickings to help bolster the public finances.<\/p>\n \u201cThat said, much of this is reflected in valuations, with UK domestic banks already trading at a discount to European peers. That may explain the relatively muted reaction to share prices this morning. More domestically focused banks, like Lloyds and NatWest have seen drops in their share prices of around 2%, although this is far smaller than the approximately 6% hit you would see if the surcharge were raised by 5 percentage points back to the 8% where it stood previously. Much of the bad news is already priced in at a time where the banks are also able to absorb such a hit thanks to the profits they are making at the moment as a result of higher interest rates.<\/p>\n Share<\/a>Worst week for South Korea’s stock market since the financial crisis<\/p>\n Elsewhere in the markets today, South Korea\u2019s Kospi share index has recorded its biggest weekly loss since October 2008, down 14.5% this week.<\/p>\n Although the Kospi did rise today (+2%), it was still a bad week for technology stocks \u2013 as investors worried about the borrowing, spending commitments and future profitability of AI companies.<\/p>\n As analyst Bill Blain of Windshift<\/a> <\/a>Capital<\/a> puts it:<\/p>\n double quotation markThe reality is that while companies embraced AI aggressively as it first emerged, now they are figuring out how to use it effectively while keeping AI costs under control. A slowing, more careful, path towards corporate adoption has been missed by the market which remained wildly frothy about valuations.<\/p>\n Share<\/a>IG: UK bank tax risk is now a base case<\/p>\n British banking stocks have eased following last night\u2019s reports that John Healey will tax the banks in the budget, says Angeline Ong, senior technical analyst at investing and trading platform IG<\/p>\n double quotation mark\u201cA UK bank tax risk is now a base case. If it is confirmed on 28 October, it\u2019ll be the size and timing that will be key.<\/p>\n If Healey does go ahead, shares of Lloyds and NatWest, which are almost entirely exposed to the UK, would likely be impacted most, and you are seeing this already in the share price reaction today. Barclays is partly exposed. HSBC is least exposed in the mix.\u201d<\/p>\n Share<\/a><\/p>\n Expectations of a budget tax raid aren\u2019t the only thing weighing on Lloyds\u2019 share price this morning.<\/p>\n The bank has also been hit with a broker downgrade \u2013 RBC cut its target price for Lloyds this morning, citing increased competition in the UK deposit market.<\/p>\n Share<\/a><\/p>\n UK banks are missing out on a wider rally in the banking sector today \u2013 eurozone bank stocks are up 0.5% in early trading.<\/p>\n Share<\/a><\/p>\n Shares in Barclays have dipped by 0.45%.<\/p>\n Share<\/a><\/p>\n Updated at\u00a003.19 EDT<\/p>\n Bank shares drop as budget tax hit looms<\/p>\n Shares in UK banks are dropping at the start of trading, as investors react to the Guardian\u2019s scoop<\/a> that John Healey is poised to increase taxes on Britain\u2019s banks in his 28 October budget.<\/p>\n Lloyds Banking<\/a> Group are the top faller on the FTSE 100, down around 1.9%, with NatWest dropping by 1.6%.<\/p>\n Share<\/a><\/p>\n Updated at\u00a003.15 EDT<\/p>\n BoE’s Bailey: seeing ‘quite subdued’ evidence of second round inflation effects Elsewhere in Bangkok today, Bank of England governor Andrew Bailey, was interviewed at the Institute of International Finance annual members\u2019 meeting, being held across town in Bangkok.<\/p>\n With the BoE\u2019s monetary policy committee due to set interest rates in three weeks\u2019 time, Bailey said he was not yet seeing many signs of the \u201csecond round effects,\u201d that would indicate inflation has spread beyond the energy sector.<\/p>\n Bailey said:<\/p>\n double quotation mark\u201cI think \u200cit\u2019s too early, but to the extent we\u2019ve seen evidence, so far it\u2019s been \u200cquite subdued.\u201d<\/p>\n Share<\/a>Warsh: Super intelligence driving ‘massive investment surge’ Heather Stewart is the Guardian\u2019s economic editor, reporting from Thailand.<\/p>\n US Treasury secretary Scott Bessent hasn\u2019t bothered to show up in Bangkok this week for the IMF\/World Bank annual meetings, but Federal Reserve chairman Kevin Warsh is here.<\/p>\n He appeared on stage earlier today in a \u201cfireside chat\u201d with an old friend: the IMF\u2019s managing director – Kristalina Georgieva.<\/p>\n Aside from lavishing praise on Warsh, Georgieva asked him about the potential economic impact of AI.<\/p>\n He said AI – for which he used Donald Trump\u2019s preferred term, \u201cSuper Intelligence,\u201d is, \u201cprobably the most consequential change to the US and the global economy in my lifetime to this point,\u201d which is causing a \u201cmassive investment surge\u201d.<\/p>\n Eventually, he said it will boost productivity – \u201cthere really is, I think a huge benefit to the global economy, to the US economy over the horizon.\u201d But – with inflation rising sharply in the US – he said there are likely to be short-term bumps in the road.<\/p>\n double quotation mark\u201cIf you believe, like I believe, that it will make economies and countries that put it to good use, more productive, that it\u2019s going to make it so that we will have more wealth, then that has to be a very good thing. But the path from where we are to there is likely to be a very bumpy one.\u201d<\/p>\n Echoing the IMF\u2019s warnings earlier this week about the potential for an AI-led market correction, Warsh added, \u201cwe really don\u2019t know what the market structure is going to be of these new technologies. Who\u2019s going to get to make the money? What are the consequences for those that bet that they were going to make money, but the market structure doesn\u2019t allow it?\u201d He said his attitude was one of optimism, leavened by seriousness.<\/p>\n In terms of the short-term outlook, it was not surprising given his rejection of \u201cforward guidance,\u201d that Warsh declined to give any sense of where interest rates might go, after last month\u2019s increase. \u201cI don\u2019t prejudge meetings. I don\u2019t believe in saying now what I might do at the meetings that we have in the balance of this year,\u201d he said – prompting Georgieva to joke that he had disappointed half the audience.<\/p>\n Share<\/a>CBI: Chancellor should avoid ‘further sector-specific taxation’<\/p>\n The Confederation of British Industry has suggested John Healey should avoid \u201cfurther sector-specific taxation\u201d, such as a bank tax.<\/p>\n Louise Hellem, chief economist at the CBI, said:<\/p>\n double quotation mark\u201cThe financial services sector is vital to driving investment, innovation and business growth across the economy. Government has set the right direction through its Financial Services Growth and Competitiveness Strategy and the Leeds Reforms \u2013 the priority now is delivery.<\/p>\n \u201cThe autumn Budget should set the agenda for a competitive and predictable environment that turns those reforms into tangible progress, unlocking domestic investment, deepening UK capital markets and helping more firms to scale and grow.<\/p>\n \u201cIt should also avoid measures that would undermine competitiveness or weaken incentives to invest. With the business tax contribution already at a record share of receipts, that means avoiding further sector-specific taxation, including on a banking sector already facing a higher tax rate than competing international financial centres.\u201d<\/p>\n Share<\/a>Introduction: John Healey poised to raise taxes on banks in budget<\/p>\n Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.<\/p>\n Britain\u2019s banks may be \u2018part of the jewel\u2019 in the UK economic crown, as chancellor John Healey put it yesterday<\/a>, but that won\u2019t protect them from being hit in this month\u2019s budget.<\/p>\n John Healey is poised to raise the tax take from Britain\u2019s banks in his 28 October budget, the Guardian understands, as the chancellor looks to fix the damage inflicted on the public finances by war in the Middle East.<\/p>\nHeather Stewart<\/p>\nHeather StewartUS Federal Reserve Chairman Kevin Warsh (right) speaks with IMF Managing Director Kristalina Georgieva (left) today. Photograph: Rungroj Yongrit\/EPA<\/p>\n