Britain goes after bankers' bonuses

One-time tax is among measures aimed at closing budget deficit

By Anthony Faiola
WashPost
Thursday, December 10, 2009

LONDON -- Britain's ruling Labor Party on Wednesday slapped a one-time levy on bankers' bonuses and vowed future spending cuts and tax hikes to tackle the government's biggest budget shortfall since World War II.

The measures underscored the extreme pressure faced by nations including Britain and the United States to confront the massive budget deficits created during the financial crisis. With tax revenue plunging and spending to bail out banks and prop up the economy soaring, the British government is now borrowing 12.6 percent of national income to cover shortfalls.

On Tuesday, Moody's credit agency warned of an "inexorable deterioration" in Britain's long-term ability to pay its debt if the government does not deal with its budget deficit. The warning fanned market fears of a credit rating downgrade. Any move to lower Britain's rating would roil world markets at a time when concern is already growing over a possible debt default in Greece after Dubai World's announcement of a suspension of payments last month.

Britain's government vowed to halve the $300 billion deficit within four years. Yet the ruling Labor Party, whose support in opinion polls has tanked, put off its toughest reforms until at least 2011, after elections expected next spring.

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