Brown Pressed by Unions, Lawmakers to Increase Spending in U.K.

Unions and lawmakers from the U.K.’s ruling Labour Party pressed Prime Minister Gordon Brown to increase spending in the annual budget, countering a warning from the central bank to keep a lid on the deficit.

The Trades Union Congress representing 6.5 million workers called on Brown today to set aside 25 billion pounds ($37 billion) to build and insulate homes, support clean energy projects and renew Britain’s rail network. Five Labour lawmakers led by former Cabinet minister Peter Hain asked for more government measures to stimulate the economy.

“The U.K. fiscal stimulus has not been that generous,” TUC General Secretary Brendan Barber said in a statement in London today. “There is still scope for a carefully targeted second round that can promote a quicker recovery.”

The demands are at odds with the advice of Bank of England Governor Mervyn King and the Institute for Fiscal Studies. Both have warned that the government already is piling up too much debt. Their advice suggests Brown may have to lift taxes or curb spending around the time of the next election, due by mid-2010.

Chancellor of the Exchequer Alistair Darling presents his budget statement to Parliament on April 22 and will have to balance concerns about the deficit against demands from pressure groups for more support for the economy.

Mortgage Rescue

Another lobby group, the Home Builders Federation, said Brown should move more quickly to prop up the market for mortgage-backed securities, which financed a third of home loans before credit markets faltered in 2007.

The Treasury is negotiating with banks about loan guarantees to prop up the market, which hasn’t created any new securities in the U.K. since August 2008.

The lobby group also called for an extension of a tax holiday on the purchase of some homes and for the Treasury to funnel more money into building houses.

Labour lawmakers including Meg Munn, Sally Keeble and Mark Todd joined Hain in calling for more government support for the economy in articles published in Progress magazine.

“More not less public investment is needed to create jobs,” Hain wrote. “Taxes on lower incomes must not rise and should be lowered if possible.”

Darling already has said the recession in Britain is worse than he had forecast in November, suggesting there isn’t much money available.

The Treasury’s deficit this fiscal year will reach 150 billion pounds, or 10.4 percent of gross domestic product, the Institute for Fiscal Studies said yesterday. Earlier this month, the government failed to attract enough investors for an auction of its 40-year bonds. King has said Darling should be “cautious” before spending more.

“In the longer term, we have to have a sustainable position,” Darling said March 26 when questioned about the budget. “A substantial amount of money has gone into the economy” already.

Source: Bloomberg