Brit PM Gordon Brown retreats on Budget spending spree

Gordon Brown seemed to heed warnings about the health of the Britain’s public finances as he retreated from plans for a massive spending package to revive the economy in next month’s Budget.

The telegraph (UK)

He was understood to have been considering announcing a new fiscal stimulus package in the Budget and encouraging other countries to do the same in an attempt to tackle the global recession.

But he appeared to have backtracked after a warning on Tuesday from Mervyn King, the Governor of the Bank of England, that Britain cannot afford further tax cuts or public spending rises and a shock failed gilt auction yesterday which raised questions over the country’s ability to borrow tens of billions of pounds to fight the economic crisis.
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Speaking in New York, where he is canvassing support for a deal on a global rescue package ahead of the G20 meeting in London next week, he said had no plans to add to the £20bn fiscal stimulus announced by Alistair Darling last autumn.

He shifted the focus from fiscal stimulus to other mechanisms intended to revive the economy. The prime minister pointed to the importance of quantitative easing, last year’s fiscal stimulus and “incredibly low” interest rates.

“If you take these three changes that have happened over the last few months together, that’s where you look for results on the combination of these three,” Mr Brown said.

He said there were other “effective and quicker ways” of kick-starting demand.

Many European leaders are growing increasingly concerned over the scale of public borrowing. Mirek Topolanek, the Czech prime minister, who holds the presidency of the European Union, said plans by Britain and America to borrow money to fund an economic recovery plan were a “way to hell”.

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