Darling Raises Taxes on Income, Bonuses as UK Deficit Rises
Dec. 9 (Bloomberg) -- Chancellor of the Exchequer AlistairDarling imposed a 50 percent levy on banker bonuses and said hewill increase income taxes after elections next year as the worst recession on record drives up government borrowing.
The Treasury expects to raise 550 million pounds ($896million) targeting payouts at banks in the next few months andanother 3 billion pounds from incomes earned after April 2011.Borrowing will rise by 4.6 billion pounds to 611 billion poundsin through March 2013.
Trailing in opinion polls before an election that he musthold by June, Prime Minister Gordon Brown is balancing the needto clamp down on a record budget deficit while extending supportfor voters struggling to keep their jobs during the slump.
“None of the measures look like obvious election bribes,”said Anthony Wells, a polling analyst at YouGov Plc. “There’sno solid thing they can point at and say ‘this is the big thingwe’re going to do that the public will see is addressing thedebt.’ This isn’t much of a game-changer.”
The finance minister estimated the deficit will total 611billion pounds in the four years through March 2013, more thanthe 606 billion pounds he expected in April. The Treasury’sshortfall of about 12 percent of gross domestic product is themost in the Group of 20 nations.
He said the economy may shrink 4.75 percent this year, morethan his April forecast for a contraction of no more than 3.75percent. He expects the economy to grow up to 1.5 percent nextyear and 3.75 percent in 2011.
Market Reaction
U.K. government bonds pared declines as Darling spoke.Gilts rallied, reversing declines, after Darling said growthwill resume next year. The yield on 10-year gilts narrowed 4basis points to 3.65 at 2:15 p.m. in London. The pound waslittle changed at $1.6244 after erasing earlier losses.
The fee on bankers applies to discretionary payments ofmore than 25,000 pounds and will be paid by the bank, not theemployee. The employees also will have to pay tax on the bonusat their marginal rate, which already is due to rise to 50percent from 40 percent on wages over 150,000 pounds from April.
From 2011, Darling said he’d raise National Insurancecontributions, which are paid by all wage earners to coverhealth and pensions.
Brown has narrowed the gap with the Conservatives sinceSeptember by stepping up attacks on bankers, who they blame forthe credit crisis that began in 2007. Darling also is pressingbanks to step up lending and to repair their balance sheetsafter taking 117 billion pounds of government aid.
‘Claw Money Back’
“There are some banks who still believe their priority isto pay substantial bonuses,” Darling said in Parliament. “I amgiving them a choice. They can use their profits to build uptheir capital base. If they insist on paying substantialrewards, I am determined to claw money back for the taxpayer.”
Five polls since the beginning of November have signaledthe Conservative lead over Labour is narrow enough to deny theopposition an outright victory in the election.
Darling confirmed he’d return value-added tax to 17.5percent at the end of this year from 15 percent. He alsoextended tax relief on empty properties, cut duties on bingogaming and raised the basic state pension 2.5 percent fromApril. He also will increase disability benefits by 1.5 percent.
Brown’s Labour government and David Cameron’s Conservativesboth have promised measures to bonus payments in the City,London’s financial district. Where the two parties diverge is onjust how quickly the government should curb the deficit.
“We can’t solve the problem of the deficit straight away,but what there’s an absence of is a credible plan,”Conservative leader David Cameron said yesterday. “I don’tthink anyone’s going to be impressed with a plan that doesn’t atleast have some early action in it.”
To contact the reporter on this story:Thomas Penny in London at tpenny@bloomberg.net
Last Updated: December 9, 2009 09:16 ESTSource: Bloomberg
« Back to Business News
Related News
-
Deutsche Bank Raises Bad-Loan Provisions, Sending Shares Lower Dec 9, 2009 @ 07:41 AM
July 28 (Bloomberg) -- Deutsche Bank AG said it set aside 1billion euros ($1.4 billion) for risky loans in the secondquarter, more than analysts estimated, sending the stock to thebiggest decline in four months in Frankfurt trading.
-
Brown Says G-20 Should Consider Tax on Speculation Dec 9, 2009 @ 07:41 AM
Nov. 7 (Bloomberg) -- U.K. Prime Minister Gordon Brown saidthe Group of 20 nations should consider measures such as taxingfinancial transactions to penalize excessive risk taking andlimit the burden on taxpayers of bank failures.
-
BNY Mellon Rises After Selling Mortgage Assets, Cutting Risks Dec 9, 2009 @ 07:41 AM
Oct. 20 (Bloomberg) -- Bank of New York Mellon Corp., theworld’s biggest custody bank, rose the most in more than fivemonths after selling mortgage securities that hurt earnings overthe past five quarters.
-
Mexico's Peso Rises for a Third Day on Budget Confidence, Oil Dec 9, 2009 @ 07:41 AM
Oct. 14 (Bloomberg) -- Mexico’s peso strengthened for athird day as growing confidence that the global economicrecovery is quickening pushed oil to a one-year high, and onspeculation the 2010 budget will pass with fiscal reforms.
-
In Dutch Finance Minister, a Voice for the Little Guy Dec 9, 2009 @ 07:41 AM
THE HAGUE — As leader of the Dutch opposition Social Democrats before the November 2006 elections, Wouter Bos demanded in a televised debate with Prime Minister Jan Peter Balkenende that he name three things he had done to make the Netherlands’ highest-paid workers contribute to fixing the country’s finances.
