Francis Elliott, Deputy Political Editor
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Britain came under international pressure yesterday to inject billions of pounds into the economy as the Chancellor, Alistair Darling, finalised plans for tax cuts and for public spending using money from NHS surpluses.
Dominique Strauss-Kahn, managing director of the International Monetary Fund, called on nations to pump in 2 per cent of their gross domestic product (GDP) in a co-ordinated attempt to stave off a severe global recession.
In Britain that would amount to £30 billion, but senior government sources yesterday dismissed suggestions of a fiscal stimulus package on such a large scale.
Whitehall officials told The Times yesterday that the spending of about £15 billion in NHS surpluses and other capital projects would be brought forward and the details disclosed in the Pre-Budget Report next week. This money is available because Whitehall departments have not proceeded with some building schemes as fast as the Treasury had intended.
Mr Darling will claim that plugging gaps in the order books of construction and other companies with state cash will help Britain to maintain competitiveness through the recesssion. Labour also believes that speeding up spending on schools and hospitals will help to sharpen the widening political divide with the Conservatives.
The Government is also preparing tax cuts for low-income families who would be more likely to spend, not save, the extra cash.
Insiders speculate that the total value of the financial injection will be about £15 billion, or 1 per cent of Britain’s GDP.
Gordon Brown and Mr Darling yesterday returned from the G20 summit of the world’s leading industrial and emerging-market nations in Washington to complete preparatory work on the PBR. Meanwhile, George Osborne, the Shadow Chancellor, signalled a significant recasting of his economic policy ahead of a key meeting with Conservative backbenchers on Wednesday. Many Tory MPs fear that the party is about to be outflanked on the issue of taxation.
But senior Conservative Party sources suggest that Mr Osborne may tell the 1922 Committee that he has identified billions of pounds of cuts to public spending that can be used to fund tax cuts. He did not deny a report yesterday that Oliver Letwin, the Shadow Home Secretary, was looking at possible cuts to spending in 2010-11.
“The choice in British politics is going to be funded tax cuts from the Conservative Party or a tax con by the Labour Party that has abandoned 15 years of rhetoric on fiscal stability,” Mr Osborne said.
He also questioned the Prime Minister’s assertion that the G20 nations had accepted his call for co-ordinated cash injections and tax cuts in order to kick-start economic growth.
“Gordon Brown told us before going to Washington that it was all about getting a global agreement for a fiscal stimulus package,” Mr Osborne said. “He has not done that.”
The Washington talks, which were hamstrung by the absence of Barack Obama, the US President-elect, did not lead to agreement on the details of proposed reforms to the world financial system, including global regulation of the biggest banks and an overhaul of the way the IMF operates.
That is expected to happen at a meeting in the spring which Britain, next year’s G20 leader, is hoping to host. As the search for suitable venues began it emerged that Mr Obama’s first international summit as President could be held at The Grove hotel, near Watford. Government officials said that Birmingham and Manchester were still under consideration but a venue near London was most likely.
Mr Darling refused to be drawn on the nature or scope of any fiscal measures in the PBR yesterday, as Mr Strauss-Kahn relaxed his opposition to tax cuts funded from borrowing. The IMF managing director said it was essential that nations considered them “where you have low inflation”.
He added: “I welcome the emphasis on fiscal stimulus, which I believe is now essential to restore global growth. Each country’s fiscal stimulus can be twice as effective in raising domestic output growth if its major trading partners also have a stimulus package.”
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Will - we DO have a British "Silicon Valley" - it is mostly in Cambridge. These companies earn billions of US$ for the UK each year. However, they may not do so for much longer, as the people who work in that area have plenty of opportunities elsewhere in the world.
Martin, Newmarket, Suffolk
When is the Times going to start supporting an English Parliament?
Or is it happy to see the majority of its readers being treated like third class citizens and expected to pay for everything with no political representation as a nation?
Stephen Gash, Carlisle, England
No more money for the public sector. It's the private sector that MAKES the wealth. Slash many , especially the jobsworths, in the publec sector. Let them find real work and make wealth for the nation. Britain must get back to making things that people need. Cut the imports. Buy British!
Millie Alfred, Ronda, Soain
if money is spent it would be better invested in wind , wave farms - nuclear power stations and the severn barrage . all work should be sourced with uk companies.
Jeff Harvey, bristol,
This government have promised a new county hospital in Gwent for the last eleven years - they always had the money and were saving it for a marginal general election.
JP, Newport, UK
Railways for goodness sake, Bring the railways up to date!
S. Barraclough, Huddersfield, Yorkshire W. R.
The government has already spent billions on schools and hospitals and neither have improved.
Labour simply don't know how to run an economy.Everytime thay have come to power they have brought the country to its knees.
It's time for a change."Yes we can."
James Currie, London, UK
The real nature of this crisis needs to be addressed.
Britain's GDP is built on debt from Eastern money and now the flow of this cheap money has stopped, the economy must change drastically.
Incentives to reinvigorate REAL WEALTH creation are needed; Keynesian fiscal policies will bankrupt the Govt.
JB, Seef, Bahrain
ah yes, more managers for schools and hospitals; that will do nicely!!!
Mike, Denham, uk
Money invested in education should go straight into creating more teachers - so less pupils per class - lets have a state education which can complete with the independent sector. Jobs for today, and real investment for the future. Imagine a 1st class education for everyone with 15 to 20 per class
Sunny, Sheffield, South Yorks
Savo is right, invest it all in manufacturing.
michael bradley, Northampton, Northamptonshire
More taxpayers money down a black hole. The only way to rebuild our economy is by in-sourcing manufacturing again.
Paul, Coventry,
It strikes me the only people who disapprove of Gordon Brown's fiscal stimulus are card-carrying Conservatives. But they would, wouldn't they. The IMF, who George Osborne quotes when it suits him, has recommended GB and other nations inject 2% of GDP via tax cuts and borrowing. GB 1, GO O.
Val Daniels, Mijas Costa, Spain
Investment should be put in to the transport and infrastructure sector. The country needs new roads plus dedicated north-south high speed rail. Large infrastructure projects, along with Crossrail, the Olympics and nuclear power, will keep Britain afloat and provide financial benefits for 100 years
Mike Henry, Abu Dhabi, UAE
I thought that the NHS was so strapped for cash, that NICE rations drugs on account of them being expensive - ie not enough money.
Phil, Preston,
Am I sufferiing from delusions or has this wretched idea not been vigorously pursued by Nu Labour in previous regimes; where untold Billions on billions of tax payers money has hurled at the NHS only to end up with a service that has failed nearly all and enriched a privileged few?
Mike O Connor, Plymouth,
Can I assume that the Government is recomending that we go out and borrow beyond our means in order to support our current lifestyles? Mind you they once suggested Icelandic banks too!
Roger Lorton, Nongprue, Thailand
UK PLC needs to completely re-educate and re-tool itself. It will be the only way it can survive by offering something of value to the world. UK Gov should offer incentives to get as many kids into higher education as it can. Incentives for 100% school attendance records, that would focus some minds
ipd, Tokyo, Japan
Cruel smoke and mirror, the government will do ppp to build and renovate school, pushing the debt on to local council tax and the nhs budget, right to buy homes is the way to build out of the recession.
michael joseph, adams-cahersiveen, madness.
What a surprise. Labour are going to buy votes by pouring more money into the Public Sector and giving handouts to the low paid and jobless. Not worth being prudent in this country. But then Brown's and Darling's pensions are nice and safe.
Bruce Burniston, Swansea, UK
If extra billions can't go into manufacturing, it is wholly predictable with an election on the horizon that Labour will trumpet its intention to pour them into the twin black holes of health and education, neither of which are delivering. Defence is in dire straits. It desperately needs support.
Mike , Bicester, UK
The "tax cur" will undoubtably be nothing of the sort.
In Nulabourspeak unemployment benefit is a "non-working family tax credit" and certainly unemployment is the only growth sector this government has blessed us with.
So we can look forward to higher taxes for people who actually pay tax.
Dr Ray, Hereford,
I guess the imf is unaware of the billions that nulabour has already spent on hospitals and schools. and of the fact that it has largely been wasted.
perhaps to boost our economy we could start to make stuff and sell it?
jem, london, uk
Time for some pork barrel politicking, what's the betting only labour seats will benefit?
Mitch, Wolverhampton, England
We as a country are overborrowed at the personal level as well as a national level. Mr Brown is trying to give us another fix of debt so he can get re lected. He is telling the banks to start lending again and people to carry on spending.Issue us another credit card and give us another loan Mr Brown
george georgiou, rotherham, england
Hasn't billions already been spent on "education" and the NHS by this government?
Does Darling expect to go on conning the electorate with the same sort of waffle and throwing our money around?
Labour is simply unfit for government.
Pinkie, London, United Kingdom
Money needs to be invested in producing green energy, ideally at user/local level and thus cut down utility costs to individuals and reducing the hostage to oil prices from abroad.
This at least would be of both short and long term benefit.
P Barrett, Plymouth,
Lovely, so feckless spenders who don't pay any actual tax get a huge windfall that the rest of us have to pay for later.
What a huge redistribution of wealth........for nothing.
Downing Street must be reverberating to the sound of 'The Red Flag...."
AP, Bristol,
Typical goody goody nonsense. It is true that the government needs to provide some stimulus but it should be spending money on things that are going to produce long term growth. Spending the money on infrastructure and wind-farms would be a lot more sensible.
John Small, Faversham, UK
Before this bombed out, disastrous Government starts robbing the NHS of its "surpluses" to build new hospitals I would suggest that it spends such "surpluses" in getting the present NHS into proper running order. But I doubt that Brown and his cronies have the brains to do such a thing.
albert hall, hove, england
Gordon refused to allow reform of the public services: more borrowed money poured into the bottomless pit of the unreformed bureaucratic NHS will not help fight recession, just keep more 'jobsworths' in their posts. As for education: everything Labour touches turns to dross. Cut spending to cut tax.
Donna Walker, Effingham, England
Reducing costs for small business would help stimulate the economy. A couple of years ago diesel was around the same price as unleaded and now its about 15p a litre dearer. Get the differential back to parity and help businesses that run vehicles and also the majority of private motorists.
Victor Roberts, Peebles, Scotland
How dare this government, having got us into this mess through allowing debt to reach unsustainable levels, propose to get us into even more debt! They will cripple us financially for years. I just hope the money is invested in businesses that produce wealth and sustain jobs, not "vote winning"...
Tim, Salisbury, UK
Will all this spending be via the private finance iniative or will the govt put the money up front.
It kind of destroys the argument for the former if the latter occurs
rick, melbourne,
Moving money is wealth creation - stagnant money (spending cuts or savings) is anathema in today's circumstances. I'm a natural Conservative, but Brown's and Darling's approach is the only one to soften the hurt of; and shorten, the recession. Osbourne's spending cuts take money out of the economy.
Mike Armitage, Manchester, U.K.
The answer is a massive road building scheme, starting with making the M25 6 lanes each way. This is the best time to do it, when there are less cars on the road (i.e. in a recession) and will provide loads of skilled and unskilled labour.
George, Grantham,
NHS surpluses? That's a good one. We have been told that the NHS cannot afford expensive drugs for cancer patients, yet remarkably monies that should be spent on the sick are being channelled into tax cuts. These tax cuts must be seen as a pre-election bribe.
Dwight Vandryver, Scholar Green, UK
The desperate 'narrative' being strummed by Campbell is that a) everybody in the world is doing this and b) the IMF told us to.
Even better, the extra borrowing will push the pound down and then Labour will blame Osbourne!
Clever. But reckless. Don't expect your readers to be spun so easily
P Orrell, London, UK
But .... We have already spent Billions on Schools and Hospitals!
Here in Swindon we have a shiny new PFI hospital, four brand new schools and a new FE college.
And the local population are STILL unhealthy and uneducated!
Pedro, Swindon,
our ecconomy has been run like 1 giant pyramid scam for the past 10 years. public and private debt, public spending and private shopping. there has been no real growth like in america or china,(ie no british silicon valley so as soon as debt stops growing our ecconomy nosedives. labours plan is?????
will, grimsby, uk
Labour will do what they've done for the last eleven years only on a bigger scale, which is spend the money and have nothing to show for it.
Robert, Wigan, GB
Schemes which improve the infrastructure of the country should be encouraged, but those that just blow money away - such as Skills Academies and other 'make-work' ideas dreamt up to reward public officials - really should be scrapped.
J Jenkins, York,
They do not know what to do!
Money invested in schools and hospitals is always welcome, but it is not the best way to invest when in crisis.
It is not money invested, it is just money spent for ever.
Investment in manufacturing starts to return money, reduces import and create jobs in 3-6 months.
savo, london, uk