Restore higher bank taxes: note

Central fiscal result

-£3.5bn - Net fiscal impact in 2028-29

Low case: -£5.0bn. High case: -£1.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Models restore higher bank taxes by 2028-29.
• Baseline is current policy or published departmental plans.
• Central case uses published party or official anchors where available.
• Wider manifesto interactions are excluded unless stated.

Affected population

• Affected units are people, firms, households or providers depending on policy.
• Direct exposure follows the manifesto or government target group.
• Indirect exposure includes suppliers, workers, consumers and taxpayers.
• Weakest counts are widened in the low and high cases.

Gross impact

• Published anchor or scenario central is +£3.5bn in 2028-29.
• Gross costs or receipts are adjusted for behaviour and delivery risk.
• Tax, benefit or procurement offsets are separated in the fiscal build-up.
• The range is deliberately wider where implementation detail is thin.

Fiscal build-up, central case

• Gross tax or receipt yield: -£4.4bn
• Behavioural and avoidance response: +£0.7bn
• Administration and compliance cost: +£0.1bn
• Other tax-base interactions: +£0.1bn

Central net impact: -£3.5bn in 2028-29.

Behaviour and pass-through

• Low case assumes stronger delivery or receipts than central.
• Central case applies moderate behavioural leakage and pass-through.
• High case allows weaker delivery, larger take-up or higher costs.
• Output effects follow incidence, capacity and investment channels.
• Distributional gains do not automatically imply GDP gains.

Phasing

• 2026-27: -£0.4bn. Phased implementation and take-up.
• 2027-28: -£1.9bn. Phased implementation and take-up.
• 2028-29: -£3.5bn. Phased implementation and take-up.
• 2029-30: -£3.5bn. Phased implementation and take-up.

Main source groups

• Devereux, Griffith and Klemm, "Corporate Income Tax Reforms and International Tax Competition" (Economic Policy, 2002): Corporate tax changes can affect location, investment and reported profits; relevant to business and bank taxation.
• Djankov, Ganser, McLiesh, Ramalho and Shleifer, "The Effect of Corporate Taxes on Investment and Entrepreneurship" (American Economic Journal: Macroeconomics, 2010): Higher effective corporate taxes are associated with lower investment and entrepreneurship; supports caution on sector-specific corporate taxes.
• Liberal Democrats, "Funding a Fair Deal: Liberal Democrat Manifesto Costings" (2024): Party costings give 2028-29 spending, revenue and investment figures; used as starting anchors, not official costings.
• Liberal Democrats, "For a Fair Deal: Liberal Democrat Manifesto 2024" (2024): The manifesto gives announced policy detail across health, care, housing, taxes and climate; used to define the policy scenarios.