Alistair Darling's pre-Budget report today is apparently the only thing that can prevent Britain from losing her historic and cherished AAA credit rating.
Moody's, the leading ratings agency, dropped this bombshell yesterday as the Chancellor prepared to deliver his statement to Parliament, according to The Independent.
Mr Darling's team has already made clear that there will be no early move to tighten fiscal policy beyond that already pencilled in at the last Budget, potentially putting the UK on the road to a debt downgrade that would have devastating consequences for sterling, investor confidence and interest rates. A "gilts strike" could follow.
Renewed concerns about the Royal Bank of Scotland and weak manufacturing figures added to the market's jitters yesterday. Although Britain retains AAA status for now, she and the US have been granted only "resilient" AAA ratings by Moody's, below the AAA "resistant" top ratings enjoyed by Canada, Germany, New Zealand, Switzerland and France. Full story...
Lord Mandelson told bankers today that the one-off tax that will be imposed on their bonuses in today's pre-budget report was not designed to "teach them a lesson", reports The Guardian.
The business secretary told BBC News that the tax on bankers' bonuses would be "balanced and judicious" and he denied suggestions that it would result in highly paid City workers leaving Britain to work abroad.
According to reports this morning, the widely trailed tax on bonuses will not be imposed on individuals. Instead banks that want to pay individual bonuses worth more than a certain amount will have to pay a tax worth more than 50% on the total bonus pot.
Alistair Darling, the chancellor, reportedly believes that this will give banks an incentive not to pay excessive bonuses. Full story...
Bankers across the City are trying to change the terms of their pay deals to avoid Alistair Darling's threatened bonus tax on their earnings, says The Times.
Financiers are in frantic talks with their employers, having moved swiftly over the past few days to try to avoid punitive taxes on their bonuses.
The City is scared that Mr Darling will use today's Pre-Budget Report to announce such a one-off levy. And high earners have rushed to make contingency plans with their employers, lawyers and accountants. Full story...
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