Nov. 24 (Bloomberg) -- Prime Minister Gordon Brown pledged 25.6 billion pounds ($38.7 billion) of tax cuts and spending over two years to counter the U.K.’s first recession since 1991.
The budget deficit will surge to 118 billion pounds in the year through March 2010, Chancellor of the Exchequer Alistair Darling said today in the government’s mid-year budget update. At 8 percent of gross domestic product, that’s more than that of any other Group of Seven country. Darling had predicted a deficit equivalent to 2.6 percent last March.
“I want to take fair and responsible steps to protect and support businesses and people now,” Darling said. “My central objective is to respond to the consequences of this global recession on our country.”
Brown, like counterparts in the U.S., Europe and Asia, is seeking to mitigate the impact of the worst global slump in three decades. Britain’s fiscal package, which includes reducing the rate of sales tax by 2.5 percentage points to 15 percent, comes as Brown prepares for an election within 18 months.
To help pay for the plan, the U.K. will raise the income tax rate for people earning more than 150,000 pounds to 45 percent in the fiscal year starting in April 2011. The highest rate is now 40 percent and all brackets above that ceiling were abolished in 1988.
