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Reeves to relax planning laws and target banks with £2bn tax rise in bid to stabilise public finances

by October 6, 2025
October 6, 2025
Reeves to relax planning laws and target banks with £2bn tax rise in bid to stabilise public finances

Rachel Reeves is poised to unveil a package of planning reforms and tax increases in her first full Budget on 26 November, as the Chancellor faces the daunting task of closing a £30 billion shortfall in the public finances.

The Treasury is said to be exploring a range of measures to stimulate growth while raising revenue, including restoring the bank surcharge to 8 per cent—a move expected to generate around £2 billion annually. The levy, imposed on bank profits on top of corporation tax, was cut to 3 per cent by the previous Conservative government in 2023 to protect the City’s competitiveness.

The Office for Budget Responsibility (OBR) is expected to assess the proposed planning shake-up as a potential long-term boost to growth, potentially adding £3 billion to the economy. That would marginally ease pressure on Reeves to deliver further tax increases, though officials concede additional revenue-raising measures are inevitable given the scale of the deficit.

At the heart of the Chancellor’s growth strategy are plans to overhaul what she has called Britain’s “outdated” planning regime. Reeves and Housing Secretary Steve Reed are pushing for changes to the Planning and Infrastructure Bill that would simplify approval for low-impact developments and restrict the use of judicial reviews that can delay major projects.

According to reports in The Guardian, the proposals could prevent judges from overturning approvals while legal challenges are still being heard and limit repeated reviews of the same project. However, such amendments risk complicating the Bill’s passage through the House of Lords, where peers may push back on curbing environmental safeguards.

A government spokesperson said the reforms were vital to “build the 1.5 million homes hardworking people need” and accelerate major schemes such as the Lower Thames Crossing.

Treasury eyes VAT expansion and bank levy hike

The Treasury is also examining ways to widen the VAT base, though no decision has been taken on raising the headline rate. Proposals have reportedly included extending VAT to currently exempt sectors such as private transport and some services. Health Secretary Wes Streeting has ruled out applying VAT to private healthcare, but officials have not dismissed other expansions.

Pressure has been mounting from trade unions to target the banking sector. The Trades Union Congress (TUC) has urged Reeves to reverse the Tory-era cut to the bank surcharge, estimating the change could raise £8 billion over four years.

However, the industry has warned against further taxation. UK Finance chief executive David Postings cautioned that additional levies could undermine growth, saying “efforts to boost the UK economy… would not be consistent with further tax rises on the sector.”

The opposition has seized on reports of fresh tax measures. Shadow Chancellor Sir Mel Stride told the Conservative conference that “more tax rises await” under Labour, accusing Reeves of having “blown a vast hole in the public finances”.

He added: “Under Labour, nothing is safe from the taxman—not your job, not your home, not your business, not even that which you wish to pass on to your children.”

Reeves, speaking at Labour’s conference in Liverpool last week, acknowledged that “tough choices” lay ahead but insisted she would keep taxes “as low as possible” amid global economic headwinds.

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Reeves to relax planning laws and target banks with £2bn tax rise in bid to stabilise public finances

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