John Healey has launched a tax raid on banks despite being told the move would hike mortgages for millions of Britons.

The Chancellor today announced an extra three per cent on the current bank surcharge to help pay for a rising cost in energy bills.

Despite admitting banks make a 'huge contribution' to Britain, Mr Healey said he is looking to the banking sector to 'help fund breathing space for British families'.

He added: 'I've made my choice in this Budget, asking a bit more of our banks to support ordinary people.' 

The three per cent levy will be 'time limited' to pay for immediate support on energy bills and take effect from January for a 15 month period.

Banks already pay an additional three per cent toll on top of standard rates of corporation tax, meaning they will now pay a six per cent surcharge. 

But the Chancellor brought forward the levy amid warnings it would hit British people in the wallets as they weather a cost of living crisis.

In a final plea to No 11 ahead of the Budget to change course, Conservative leader Kemi Badenoch said increasing taxes on banks would lead to 'lower wages for staff, higher prices for consumers or lower dividends for shareholders'.

She added: 'When John Healey flirts with a tax rise on banks, it's not fat cats who will end up paying, it will be small businesses who find it harder to get a loan and it will be home owners facing higher interest rates on their mortgage.'

'What looks like a tax on banks or energy companies ends up going on your energy bills or your mortgage'. 

Commenting after Mr Healey had delivered his Budget, Mrs Badenoch said: 'They are making the same mistake with banking that they made with oil and gas: tax one of Britain's flagship industries until they pack up and leave. 

'The result: the country gets less money in tax.'

Chief of deVere Group Nigel Green said while the surcharge was less than expected, 'a smaller tax is still a tax, and banks don’t pay it out of thin air'. 

He added: 'Every pound the Treasury takes is a pound that can’t be lent to a young couple buying their first home or a small firm trying to expand.'

Both Andy Burnham and the Chancellor have made providing 'breathing room' to British households a key message of their Government. 

But analysts at financial services firm UBS said banks would pass on the cost of higher taxes to customers in the form of higher mortgage rates and lower savings rates ahead of the Budget.

It comes as the average mortgage rate on offer in the UK has already risen from 4.25 per cent before the outbreak of war in Iran to 5.06 per cent today, according to data released by Rightmove today.

Despite claiming earlier this month that banks were the 'jewel in the British economic crown', the move could also deter much needed investment into the UK.

UBS analyst Jason Napier warned that a raid on banks would 'disincentivise' investment and 'bring in less money than moves the needle' on public spending and debt. 

And JPMorgan boss Jamie Dimon warned earlier this year that his bank could pull investment from the UK if Labour chose to 'become hostile to banks again'.

The increase lifts the combined tax rate on UK banking profits above £100m to 31 per cent, with a separate levy on balance sheets charged on top. 

Banking's tax bill has climbed by 8.5 per cent since April last year, to a punishing £39.1billion. 

Economist Julian Jessop warned: 'Shareholders will bear some of the cost through lower profits and dividends, although many 'ordinary' people own bank shares through their pension funds. 

'But customers will also pay through higher bank charges, while employees will face lower wages. Everyone will lose if banks cut jobs and investment, or move activity overseas.'

Mr Healey's move brings the Labour into closer alignment with the Green Party, which has consistently called on Government to tax banks to the hilt.

And trade unions were quick to praise the move as 'plain common sense'.

Paul Nowak, general secretary of the Trades Union Congress, said: 'At a time when millions are struggling to get by, taxing banks' bumper profits to cut energy bills is plain common sense. 

'The Chancellor has made a good start by doubling the bank surcharge – next he should be prepared to extend it and raise it if profits remain sky high.'