Business | Economy
UK will slash taxes to rein in recession
Prime Minister Gordon Brown is expected to try and kickstart the stalling British economy by spending billions of borrowed pounds on tax cuts in a bid to stop a recession turning into a slump.
- Reuters
- Published: 23:35 November 24, 2008
London: Prime Minister Gordon Brown is expected to try and kickstart the stalling British economy by spending billions of borrowed pounds on tax cuts in a bid to stop a recession turning into a slump.
The package, expected to total up to £20 billion ($30 billion), or more than one per cent of gross domestic product, will include extra public spending but will also include a warning taxes will rise later to pay for the boost.
An expected rise in income tax for high earners - deferred until after the next election - would be a major policy shift for Brown's Labour government and mark the first time that tax had been raised since 1975.
"Extraordinary times require extraordinary action," Brown told a business conference yesterday.
The package is expected to include a cut in sales tax and help for businesses, low earners and home owners.
The stakes are high: Britain is sliding into recession with house prices slumping, unemployment rising and manufacturing output shrinking.
Although Brown's handling of the financial crisis has lifted his flagging popularity, a poll published on Sunday still showed his Labour Party trailing the opposition Conservatives by 11 points, a wider margin than some other recent surveys.
"They are throwing money at us now to take it back at a later date. That is the real story of this pre-budget report," Conservative leader David Cameron said. "Never in the history of Britain have so many owed so much."
Brown's chances of winning the next election, due by mid-2010, may depend on the recession being relatively short and shallow - but that is looking increasingly unlikely.
As well as radically increasing his borrowing numbers, finance minister Alistair Darling will have to slash his economic activity forecasts.
In March, he forecast growth of about two per cent this year.
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