- "Chancellor of the Exchequer George Osborne laid out a blueprint on June 22 that is intended to reduce the U.K. government’s deficit by £128 billion (about 10 percent of current GDP) by 2016. Although spending bears the brunt of the burden — 77 percent of the deficit reduction comes from the spending side of the ledger—tax hikes, especially an increase in the value added tax, would also play a role in closing the budget gap."
- "Although the fiscal adjustment will likely exert some headwinds on growth over the next few years, we do not expect the U.K. economy to slide back into recession in the near term. Although the increase in the VAT may cause CPI inflation to remain uncomfortably high into 2011, we believe that the fiscal retrenchment will keep the Bank of England on hold for the foreseeable future in order to provide a support for economic growth. The budget plan should provide a firebreak, at least for the time being, to keep the sovereign debt crisis that has engulfed some European countries on the other side of the English Channel."
- "In our view, Chancellor Osborne has put forth a credible plan to bring the government’s budget back toward balance. However, only time will tell if his efforts are successful. Revenue targets will be difficult to achieve if economic growth turns out to be slower than expected, and political opposition could eventually emerge to the spending cuts. It will take a number of years and numerous challenges before the United Kingdom arrives at the end of its thousand-mile journey of fiscal adjustment."
Wells Fargo Special Commentary 20100624
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