Britain throws caution to the wind in anti-recession fight

London  - In Britain, 2008 will be remembered as the year Prime Minister Gordon Brown abandoned prudence and fell in love with big spending.

In order to keep the nation shopping, despite the credit crunch, Brown threw his customary caution to the wind and embarked on a spending programme of mammoth proportions.

His decision to confront the recession by cutting taxes and hiking public debt to record levels has been hailed as courageous by supporters, and condemned as a monumental gamble by critics.

It certainly marked a 360-degree turn for Brown, who had spent his 10 years as Chancellor of the Exchequer telling the nation that the Labour Party would never allow the return to the policy of "boom and bust."

That promise, Brown admitted recently, had been a "mistake." The economic crisis facing Britain now required fiscal action, immediate and on a big scale.

"My father used to say 'a stitch in time saves nine' and I think that's an important message," said Brown.

Only time will tell whether the consumer, after a decade-long binge of "easy" credit card spending, will hear the message and splash the cash.

The initial signs are not good: Consumers, hard pressed by tight lending and rising living costs, cut back spending on holidays and clothing to levels not seen for 13 years, a survey showed.

The government's 20-billion pound (30 billion dollar) giveaway, announced in late November, takes the form of a temporary cut in Value-Added-Tax and other fiscal measures.

It is based on the expectation that the economy will show signs of recovery as early as the middle of 2009 - a view challenged by many economists - and that tax rises can be introduced to plug the widening financial hole.

According to government plans, compulsory taxation on health and social services will go up in 2011, while top earners will be catapulted into a 45-per cent tax bracket.

Net borrowing, meanwhile, will soar to 120 billion pounds next year, and reach a dizzying - and unprecedented - 1 trillion pounds by 2013.

"This is a gamble on a monumental scale, a bet on the world economy growing again by the middle of next year," said Hamish McRae, economics editor of the Independent newspaper.

If the government's plan of a temporary fiscal boost should fail to have the desired effect, economic stagnation, and possibly a run on the pound, could follow, he said.

"Brown goes for broke," said the Independent. The more conservative Times saw the prime minister exposing his "socialist roots" by breaking New Labour's pledge never to increase income tax - let alone using taxation as a tool for wealth distribution.

The plan to hike taxes for the 800,000 people with an annual income of more than 150,000 pounds, while cutting taxes on lower salaries, would herald a "pivotal change" that would shape British politics for years ahead, said the Independent.

It would give voters the "stark choice between two very different futures.

"A European-style social democracy under Labour, in which the better off pay higher taxes to maintain public services, or a nation of lower taxes and state spending under the Conservatives."

The Conservatives, in a complete role reversal, have now become the party opposing tax cuts and higher public spending.

They have condemned the Brown plan as a "tax bombshell" that would lead to the "greatest failure of public policy for a generation."

The plan, they say, will make the recession worse and the recovery more difficult.

However, with a general election possible in 2009, and a certainty by mid 2010, Brown must hope to hold the winning hand.

If he fails, it will be the Conservatives under David Cameron who will be saddled with the legacy of the Brown plan. (dpa)

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