Britain to unveil stimulus plan as recession looms
AFP - Monday, November 24
LONDON (AFP) - - The British government is expected to unveil plans on Monday to slash taxes and boost spending as it sets out a bold economic stimulus package designed to combat looming recession.
As the country grapples with a sharp economic slowdown, mounting job losses and souring consumer sentiment, Prime Minister Gordon Brown has promised to act decisively -- and denied he was gambling with the public finances.
"Doing nothing is not an option," Brown will tell delegates on Monday at the annual conference of the Confederation of British Industry (CBI), the country's biggest employers' organisation.
"A new approach is now needed if we are to get through this unprecedented global financial recession with the least damage to Britain's long term economic prospects," he will say, according to an advance copy of his speech.
Reports suggest that finance minister Alistair Darling will announce a cut in value added tax (VAT) from 17.5 percent to 15 percent to stimulate spending on goods and services, when he presents his pre-budget report to parliament.
The report -- an outline of his tax and spending intentions ahead of the full budget next year -- will also include plans to raise the top rate of income tax from 40 pence to 45 pence in three years' time, media reports say.
Brown argued at this month's G20 summit in Washington that governments must spend their way out of the global downturn.
It is thought Darling could slash taxes by 15 to 30 billion pounds (18-35 billion euros, 22-44 billion dollars).
However, the leader of the main opposition Conservatives, David Cameron, warned public borrowing could top 100 billion pounds to pay for Brown's stimulus package, and said this would lead to a "tax bombshell" in the future.
He accused the government on Sunday of going on a "borrowing binge" that would lead to higher taxes later, saying: "That actually says to people this is not a stimulus -- this is actually a warning about a big tax bombshell."
But Brown denied he was playing fast and loose with the nation's finances, telling the BBC: "I don't see this as a gamble. I see this as necessary, responsible action that any sensible government would want to take."
Commentators noted that an increase in the top rate of income tax could head off Conservative criticism that the government's plans were unfunded, while at the same time emphasising the ruling Labour party's commitment to fairness.
Brown, Britain's "Iron Chancellor" for a decade until he succeeded Tony Blair last year, won widespread plaudits this month for a huge 37-billion-pound banking-sector rescue deal that was emulated in Europe and the United States.
His support back home has also been boosted by his handling of the financial crisis, although an ICM poll published Sunday suggested his party is still 11 percentage points behind the Conservatives.
Polls last week showed the gap had narrowed to just three points, a major comeback given the Tories were 20 points ahead for much of this year.
But Britain's economy suffered more bad news last week in the form of deteriorating public finance and retail sales data.
A wave of major companies have meanwhile axed thousands of British jobs in recent weeks, including AstraZeneca, BAE Systems, BT Group, Rolls-Royce and Virgin Media.
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A man walks past the Bank of England in London in early November. The British government is expected to unveil plans to slash taxes and boost spending as it sets out a bold economic stimulus package designed to combat looming recession.
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