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Brown Says Fiscal Stimulus in U.K. Will Be Temporary

Confirms a lack of understanding of fiscal policy.

Brown sets out anti-recession plan

Gordon Brown on Friday heralded an anti-recession strategy founded on tax cuts for low earners and further cuts in interest rates. People on low incomes had “a higher propensity to spend if their credits are higher”, Mr Brown said, noting that recipients of a wider US fiscal stimulus of $170bn (£113.7bn) approved last February had saved half the money. “In the US, rates have been cut to 1 per cent but the European area has been slower with 3.25 per cent in the euro area and 3 per cent in the UK,” he said in a speech. Mr Brown said he endorsed the views of Mervyn King, BoE governor, that there was scope for further cuts. Mr Brown invoked the memory of John Maynard Keynes, whose plans to reflate the economy in the late 1920s were dismissed by the Treasury chief secretary of the time with three words: “Inflation, extravagance, bankruptcy.”

Brown says fiscal stimulus in UK will be temporary

Prime Minister Gordon Brown said Britain’s financial stimulus package will be “temporary.” Brown’s remark mirrors BOE Governor Mervyn King’s warning that the government must put forward a credible plan to reduce the deficit over time. “In these extraordinary circumstances, it would be perfectly reasonable to see some use of fiscal stimulus, provided two conditions are met,” King said on Nov. 12. “One, that it’s temporary. Secondly, that it would be clear there was a medium-term plan to bring tax and spending into balance.” The U.K. Treasury had a budget gap of 37.6 billion pounds ($57 billion) in the first half of its fiscal year. Since March, Brown’s government delivered tax cuts and spending increases worth 4.8 billion pounds to give relief to low-income earners, delay an increase in fuel duties and to help homeowners with mortgages and stamp-duty taxes.


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