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JP Morgan told Rachel Reeves the bank would leave UK if taxes increased [1]

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Date: 2025-05

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.

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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 years due to rising interest rates.

But one industry source suggested that such reports could have been fed to the media by industry as part of a lobbying strategy to put pressure on the government over the tax.

Dimon met with Reeves in Whitehall on 4 September. During the same visit, he also met with Starmer, though Downing Street told openDemocracy the prime minister only “attended briefly”.

Days later, openDemocracy wrote to the Treasury under Freedom of Information law to request any notes on what was discussed at the meeting as well as copies of any follow-up correspondence.

The Treasury delayed the response on six occasions. While it is still refusing to release any notes from the meeting, it did disclose follow-up correspondence from JPMC to Reeves to openDemocracy last month.

This correspondence shows that Dimon made a number of requests on tax and regulatory issues, almost all of which came to pass in the budget on 30 October.

The main issue raised in the letter – suggesting it was a key topic of discussion during the meeting – was over the UK’s tax regime, which the bank said was “impacting investment attitudes… and appetite for committing further capital”.

“We recognise that newspaper articles speculating on possible changes to the bank levy and surcharge in the budget are just that, speculation. However, we would note that our industry still pays more than other sectors of the economy,” they wrote.

“As a firm that still continues to base so much of its international business here by choice, any further increase in taxes on our liabilities and profits here in the UK would inevitably lead to us reviewing where certain business is booked.”

Fariya Mohiuddin, interim director of external affairs at Tax Justice UK, said: “Time and again, we see the very wealthiest people and companies get access to governments and politicians.

“Their wealth and status grants them direct access to lobby the government of the day for favourable changes to legislation or put the brakes on policies they disagree with, like it appears to have happened here with JP Morgan.”

In the same letter, JPMC appears to suggest that the government should intervene with the UK’s tax authority, HMRC, on court cases over VAT exemptions for financial services firms – a clear request to breach the operational independence of HMRC.

In 2023, a UK court ruled against JP Morgan’s appeal over HMRC’s refusal to issue a VAT exemption on services provided from one part of the banking group to another.

The letter sent from Dimon’s representative said: “The contentious nature of HMRC’s views… will likely result in controversy, costly litigation, and continued uncertainty, risking the UK’s competitive position in the [financial services] sector.”

It went on to add that JPMC’s concerns “could be addressed by ensuring that HMRC and [the Treasury] align with government policy objectives and engage collaboratively with the industry in the development of VAT policy”.

Mike Lewis, the director of the TaxWatch think tank, said: “It has long been an article of faith, essential for the impartial administration of the law, that the Treasury does not interfere in HMRC’s operational decisions about how to enforce tax law, and against whom. I suppose that lobbyists are free to ask ministers to do so, but it would be improper for them to agree.”

Elsewhere in the letter, JPMC urged the government to increase the threshold for ‘ringfencing’ rules, which were introduced in 2019 and prevent banks with over £25bn in UK consumer deposits from using those deposits to finance their investment and international banking.

JPMC described the system, which is intended to reduce risk and avoid taxpayers having to bail out failing lenders, as was the case after the 2008 financial crash, as a “barrier to continued growth”.

Less than one month after the meeting between Reeves and Dimon, the government announced it would increase the ringfencing limit to £35bn.

At the time, the Financial Times reported analysts’ view that the main beneficiaries of the increase would be US banks with a UK retail presence, naming Goldman Sachs’ Marcus bank and JPMorgan’s Chase, as both banks were approaching £25bn in deposits.

The CEOs of four of the UK’s leading banks (HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK) last month wrote to Reeves to call for ringfencing to be abolished entirely. The chancellor responded that she was “open-minded” about further reform, according to Sky News.

Since meeting with Reeves, Dimon has made two rare public interventions in UK politics, offering glowing support for the otherwise embattled chancellor and Labour’s political project.

In April, he told The Financial Times: “I’ve always been a believer in the UK’s inherent strengths as a place to do business and there’s much to like about the new government’s pro-growth agenda. They have reinforced their commitments to an open economy, strengthening of infrastructure and the stability of markets – all of which is good for investor confidence.”

And this week, having visited Parliament for the first time to coincide with the UK-EU summit, Dimon told The Times that he backs the government’s efforts.

“I deeply applaud pro-business, pro-growth, pro-deregulation – not deregulation that hurts,” he said. “To get economies growing, you’ve got to do what they’re trying to do: reduce burdensome regulations, not all regulations, get investment money, get capital, help job creators create jobs. I’d love to help [the government].”

‘Greater risk of financial crises’

Over the past few years, banks have seen profits surge as a result of rising interest rates. The sector has not seen taxes increase overall during the same period, despite this boost to profits.

This is because the bank surcharge – a tax on the banks’ profits – was cut from 8% to 3% in April 2023, leading to a £1.1bn drop in government tax receipts.

“This tax cut came alongside an increase in the main corporation tax rate from 19 to 25% – so tax rates on banks’ profits haven’t fallen overall,” Lewis told openDemocracy, “but they have increased much less than those on other businesses’ profits.

“And unlike the energy profits levy, for example, the bank surcharge wasn't increased in last year’s budget.”

A 25% windfall tax on oil and gas companies’ profits was introduced by the Conservative government in May 2022 and has since been increased twice, most recently to 38%.

Raising the amount of tax banks pay on their profits in line with the amount energy firms pay would generate more than £15bn, according to research published by campaign group Positive Money ahead of the autumn statement. Even a much more conservative increase would still yield billions in tax revenues, the research found.

Ellie McLaughlin, senior policy and advocacy manager at Positive Money, said: “The reason the bank surcharge exists is because of the risks that the banking sector's activities pose to the wider economy.

“The reality is that JP Morgan’s activities serve the City of London and wealthy individuals – not the vast majority of the public who will likely not take kindly to branchless banks threatening to leave the country unless they’re permitted to put the wider economy at greater risk of financial crises.”

Leading economists, academics and campaigners wrote to the Treasury late last year to raise concern about the government's approach to the financial services sector, which “risks undermining the government’s efforts to grow the economy”.

“There remains a widely held view among economists, industry and the wider public,” they wrote, “that Britain’s financial sector has grown increasingly detached from its core purpose of supporting the wider economy.”

“As the financial sector grows, it typically does so by increasing leverage and excessive risk-taking, which, as history teaches us, ends in recurring crises.

“Instead of seeking to increase the growth and competitiveness of the financial services sector as an end in itself, the government’s strategy for finance should focus on ensuring it is adequately regulated and able to meet the needs of the wider economy, including the other target sectors identified in the government’s industrial strategy.”

openDemocracy has previously revealed that lobbying by Blackstone, another highly influential financial institution, may have prompted the Treasury to change course on the tax treatment of non-doms.

Last year, we reported on a successful major lobbying effort by the City to dissuade Labour from closing a tax loophole enjoyed by the highly influential private equity sector, known as ‘carried interest’.

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[1] Url: https://www.opendemocracy.net/en/dark-money-investigations/jp-morgan-chase-rachel-reeeves-leave-uk-increase-tax-bank-surcharge-jamie-dimon-autumn-budget/

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