ARANCA News Report (www.aranca.com) 
London, Tuesday, November 25, 2008 :
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Britain Announces Stimulus Package of £20 billion

Following in the footsteps of China, Japan and Australia, Britain announced a huge stimulus package to boost consumer spending in an attempt to stave off a deep and potentially painful recession.

As part of  the £20 billion ($30 billion) fiscal stimulus package, the government aims to cut taxes, increase spending on public projects like infrastructure, and provide help to homeowners battered by high mortgage rates. Plans to provide finance to small businesses and retirees were also part of the package.

"The budget will protect businesses and people now while putting public finances on the road for the future," Alistair Darling, Chancellor of the Exchequer, said. "If we do nothing we'd have a longer and deeper recession," he added.

“My pre-budget report today contains a substantial fiscal loosening to help the economy now, with a 20-billion-pound fiscal stimulus between now and April 2010." Darling stated while addressing the parliament.

As part of the plan, the government will reduce the value-added tax on goods and services to 15 percent from 17.5 percent for a year, applicable from Dec 1. This is equivalent to giving consumers 12.5 billion pounds, said Darling,

The government also announced massive public spending plans worth £3.0 billion including motorway upgrades, refurbishment of schools and repairs to public housing.

The stimulus package would however take Britain’s budget deficit-already one of the largest in developed nations, to £118 billion or 8 percent of gross domestic product, in 2010. To fund the package the government plans a significant increase in borrowing and raise taxes.

As the country already in recession struggles with a battered financial system and a housing market slump, Darling predicted an economic contraction of 0.75-1.25 percent in 2009. This is sharply revised from his March forecast of 2.25-2.75 percent growth. He also forecast the economy to bounce back again in 2010 with growth of 1.5-2.0 percent.

 

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