"British Labor Party unveils plan for record borrowing" by Kevin Sullivan, Washington Post | April 23, 2009
LONDON - The British government, vowing to spend its way out of the deepening economic crisis, unveiled a budget yesterday that will increase government borrowing to a record $255 billion this year and impose a 50 percent tax rate on Britain's highest earners.
In addition to its crucial implications for Britain's faltering economy, the massive spending plan's success or failure could also determine the fate of Prime Minister Gordon Brown in national elections that must be held by May 2010. The budget calls for more than $1 trillion in borrowing over the next five years, which he said would increase Britain's public debt to 79 percent of the national gross domestic product by 2013, levels not seen since World War II.
While the unprecedented scale of the borrowing and debt left Brown's political opponents sputtering, Alistair Darling, Britain's chancellor of the Exchequer, or finance minister, told Parliament that the spending package reflected "our core values of fairness and opportunity - and our determination to invest and grow our way out of recession."
Darling projected that the economy would shrink by 3.5 percent in 2009. And, to jeers from political opponents in the House of Commons chamber, he predicted that the British economy would begin to turn around by the end of this year. Brown has bet his political future on his economic experience and leadership on the crisis, both at home and internationally. He is a strong proponent of robust government fiscal stimulus, fueled by borrowing.
Political opponents responded ferociously to the budget, saying it proved that Britain's recession is deeper than Brown and his Labor Party had previously acknowledged and accusing Brown of mismanaging the economy as premier and helping to create the financial crisis in his decade as chancellor. "They have condemned us to years of unemployment and decades of debt," said Liberal Democrat leader Nick Clegg.
Brown's 50-percent tax on the top 1 percent of British earners - those earning more than $218,000 a year - was a surprise. Several financial industry analysts said the proposed tax increases could lead some financiers to flee Britain for more tax-friendly locations, further straining the financial industry.
Darling's tax increases ranged from the boardroom to the pub, including a 2 percent tax increase on alcohol and cigarettes. He also announced a 2 percent increase in the gasoline tax.
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