Early reaction to the U.K.’s pre-Budget report — which features a large tax on banker bonuses — is highly negative.
FT Alphaville has collected statements from several analysts. The worst comes from Monument Securities’ Marc Oswald, who calls for a credit downgrade. He writes:
So what do we have:
a) no material changes in the PSNB and GDP forecasts, though we will get an extra £5.1 Bln of Gilt issuance
b) no plans to cut expenditure other than the £5.0 Bln of ‘efficiency savings’, which always never really materialise. Without expenditure cuts, and without substantial cuts in public sector employment, fiscal consolidation is not going to happen
c) a 0.5% hike in NI contributions from 2011, which is a taster of things to come, but doubtless only justifies increasing NHS and other social security spending.
d) a totally gratuitous £550 Mln tax on bank bonuses, which will obviously make an enormous dent in a £178 BILLLION PSNB this year and £176 Billion next year
e) some tinkering with the cost of the bank bail-out that ostensibly reduces the cost to £50 Billion from £60 Billion
f) the forecasts for GDP for 2012 onwards still look as unrealistic as they did in April.
Read further reactions at FT Alphaville.