Britain to hit rich to fund tax cuts as recession looms
The British government is expected to hit the rich to pay for tax cuts aimed at getting consumers spending again, in an economic stimulus package to be unveiled on Monday.
By Agencies |
LONDON: The British government is expected to hit the rich to pay for tax cuts aimed at getting consumers spending again, in an economic stimulus package to be unveiled on Monday.
In a bid to counter the looming recession, finance minister Alistair Darling is expected to announce a future rise in income tax for top earners to cover while cutting value added tax (VAT) to stimulate spending on goods and services.
As the country grapples with a sharp economic slowdown, mounting job losses and souring consumer sentiment, Prime Minister Gordon Brown has promised to act decisively -- and denies he is gambling with the public finances.
"Doing nothing is not an option," Brown will tell delegates at the annual conference of the Confederation of British Industry (CBI), the country's biggest employers' organisation.
"A new approach is now needed if we are to get through this unprecedented global financial recession with the least damage to Britain's long term economic prospects," he will say, according to an advance copy of his speech.
Obliged to keep within European Union rules on the application of VAT, reports suggest Darling will announce a VAT cut from 17.5 percent to 15 percent when he presents his pre-budget report to parliament.
The report -- an outline of his tax and spending intentions ahead of the full budget next year -- will also include plans to raise the top rate of income tax from 40 percent to 45 percent in three years' time, media reports say.
The rise is expected to target those earning more than 150,000 pounds (224,000 dollars, 178,000 euros) a year.
The current top rate of income tax is levied on earnings of more than 39,825 a year. It covers about four million people.
In a bid to counter the looming recession, finance minister Alistair Darling is expected to announce a future rise in income tax for top earners to cover while cutting value added tax (VAT) to stimulate spending on goods and services.
As the country grapples with a sharp economic slowdown, mounting job losses and souring consumer sentiment, Prime Minister Gordon Brown has promised to act decisively -- and denies he is gambling with the public finances.
"Doing nothing is not an option," Brown will tell delegates at the annual conference of the Confederation of British Industry (CBI), the country's biggest employers' organisation.
"A new approach is now needed if we are to get through this unprecedented global financial recession with the least damage to Britain's long term economic prospects," he will say, according to an advance copy of his speech.
Obliged to keep within European Union rules on the application of VAT, reports suggest Darling will announce a VAT cut from 17.5 percent to 15 percent when he presents his pre-budget report to parliament.
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The report -- an outline of his tax and spending intentions ahead of the full budget next year -- will also include plans to raise the top rate of income tax from 40 percent to 45 percent in three years' time, media reports say.
The rise is expected to target those earning more than 150,000 pounds (224,000 dollars, 178,000 euros) a year.
The current top rate of income tax is levied on earnings of more than 39,825 a year. It covers about four million people.
It is thought Darling could slash taxes by 15 to 30 billion pounds and commentators said the expected new rate would make minimal inroads into Britain's ballooning debt, raising two or three billion pounds a year.
Robert Chote, director of the Institute of Fiscal Studies, estimated that it would be paid by about 400,000 people.
"You are not going to raise an enormous amount of revenue from this," he said.
Brown's governing Labour Party has pledged not to raise income tax rates and the tax hike is duly planned for 2011, after the next general election, due by May 2010 at the latest.
The prime minister calls the election date and the strategy will only fuel speculation that Brown is plotting a course to a fourth consecutive general election victory for his centre-left Labour Party.
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Brown insisted on Sunday that he was making no plans to go to the polls next year.London share prices rose by 2.30 percent to 3,867.76 points on on the FTSE 100 index when trading began on Monday. The index had fallen by 2.43 percent on Friday.
David Cameron, leader of the main opposition Conservatives, has warned that public borrowing could top 100 billion pounds to pay for Brown's stimulus package, and said this would lead to a "tax bombshell" in the future.
Brown denied he was playing fast and loose with the nation's finances, telling BBC television on Sunday: "I don't see this as a gamble. I see this as necessary, responsible action that any sensible government would want to take."
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Brown, Britain's finance minister for a decade until he succeeded Tony Blair last year, won widespread plaudits this month for a huge 37-billion-pound banking-sector rescue deal that was emulated in Europe and the United States.His domestic support has also been boosted by his handling of the financial crisis, although an ICM poll published Sunday suggested Labour is still 11 percentage points behind the Conservatives.
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