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UK Autumn statement is full of surprises - BBH

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 26, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at BBH, suggests that the UK’s Autumn Statement had many surprising elements to it with the government will rely more on tax increases than spending cuts, making this budget look a lot less fiscally austere.

    Key Quotes

    “One of the main talking points was a U-turn on the £4.4 bln tax credits, which will now be maintained, and there will be no cuts to the police budget. On the other hand, the tax on buy-to-let properties and second homes will be increased by 3%, which is thought to bring in £21 bln by 2021.”

    “Many have interpreted the statement as a move towards the centre, and a fiscal plan that would look more Labour than Conservative. Still, the government has maintained the target of achieving a £10 bln surplus by the end of the Parliament in 2020.”

    “Keeping the surplus target was made easier by the updated forecasts by the Office for Budget Responsibility which brought a surprise £27 bln improvement in its 5-year forecast from higher tax revenues and lower debt interest payments. As such, we don’t expect any significant impact on UK sovereign debt or the pound. However, short-sterling interest rates continue to fall, suggesting the market has not done adjusting to the later lift off by the BOE. Sterling cannot get out of its own way and may slip below $1.50.”
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