British ministers and treasury officials are considering an emergency package of tax cuts and public spending, the Financial Times reported on Saturday, but a government spokesman termed it mere speculation. The newspaper, which did not cite any sources for the report, said the measures have not been finalised, but may be included in a pre-budget report later this month.
"This is typical pre-budget report speculation. Clearly tax is a matter for the chancellor as part of the pre-budget report and a date for that hasn't even been set yet," a treasury spokesman said. The article quoted Prime Minister Gordon Brown as saying on Friday that there was an emerging consensus throughout the world that fiscal policy should be used to support growth.
The FT report appeared after US President-elect Barack Obama called on Friday for urgent passage of a US stimulus package to reinvigorate a faltering economy. On Thursday, the Bank of England made a shock 1.5 percentage point cut in interest rates to 3 percent, the lowest level in more than half a century, as it sought to prevent Britain from sliding into a deep recession. The Bank made the biggest interest rate cut since the 1981 downturn, saying it was needed because the economic outlook had got a lot worse and drastic action was needed.
The British economy shrank for the first time in 16 years in the third quarter and most economists expect further contraction through next year and only a small recovery in 2010, when Brown must call an election. The FT quoted an expert as saying that any UK stimulus package would have to be worth around 15 billion pounds ($23.54 billion), or 1 percent of national income, to have much effect.
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