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Brown tears up rule book to fight recession

LONDON: In an unprecedented break with its own stringent fiscal rules and Labour Party’s traditional opposition to tax cuts, the British government on Monday announced unfunded tax concessions amounting to more than £15 billion declaring that “exceptional times require exceptional action.”

An emergency anti-recession package, described as the biggest shake-up of Labour’s economic policy since it came to power in 1997, included income tax cuts for modest, middle and low-income groups, a two per cent reduction in VAT to encourage consumers to spend more money to stimulate the economy, and a series of measures to help small businesses, homeowners with mortgages and pensioners.

The government also proposed a massive programme of public spending to generate employment.

The package, announced by Chancellor Alistair Darling in his annual Pre-Budget report in the Commons, will push up government borrowing to a whopping £118 billion next year prompting accusations that it was “borrowing” its way through the recession.

Tories warned that this would mean a “tax bombshell” later as the government would be forced to raise taxes to pay the debt. They said the proposal to raise the income tax for the wealthy — those earning more than £150,000 a year — would not yield enough to finance the borrowings.

Shadow Chancellor George Osborne accused the government of pushing the country to “the verge of bankruptcy” by doubling the national debt.

But Mr. Darling said it would be “perverse and damaging” to stick to government borrowing rules in the current crisis. “If we did nothing we would have a deeper and longer recession that would cost the country more in the long term,” he said.

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