Taxman rakes in record £72bn from the City

THE City paid a record £72bn in taxes last year in a fresh sign that Britain’s crucial financial services sector remains in rude health.

This accounted for 11pc of total taxes raked in by the Exchequer and was £700m more than in the previous 12 months.

The figure suggests the Brexit vote has had no discernible impact on big banks’ and insurers’ money-making capabilities or the number of people they employ.

And although it highlights the importance of London’s financial powerhouse to public finances, critics said the huge tax take shows there is an urgent need to rebalance the economy away from an over-reliance on banking. The last Labour government had encouraged a catastrophic boom in the industry which eventually forced taxpayers to make multi-billion-pound bailouts to Lloyds, Northern Rock and Royal Bank of Scotland.

John Longworth, a former head of the British Chambers of Commerce who is now joint chairman of eurosceptic group Leave Means Leave, said: ‘This demonstrates that Brexit has had no effect on City performance – you could almost say it’s had a positive impact.

‘But although the City is a cash cow for tax, it is also a drag on the rest of the country. The City should be there to serve the rest of the country, rather than driving its own performance, and being overly reliant on financial services has left the UK taxpayer with a massive debt burden.’

The figures, compiled by accountant PwC for the City of London Corporation, show that the financial services sector paid £72.1bn in the year to March 31, up 1pc and the highest recorded in the decade that data has been collected.

Employment taxes paid by bankers and other professionals made up the largest proportion of this figure at £31.4bn, while corporation tax raised £11.6bn. The rest came from VAT payments and other smaller bills such as stamp duty and business rates. In total, the sector has handed £649bn to the taxman in the past decade.

Banks had claimed they could shift jobs out of London because of Brexit – but many have since backed away from mass relocations.

Andrew Kail of PwC said: ‘London will remain one of the most important and attractive international centres for financial services and global business.

‘However, the financial firepower of the UK’s regions is also put into sharp relief by this report.

‘To underpin this great performance, there must be a strong supply of local talent with the relevant skills, competitive costs and high productivity.’