Budget 2009: Gordon Brown declares class war with tax on high earners

Gordon Brown has been accused of launching a "class war" against Middle Britain as he introduced a new 50 per cent top rate of tax to make the wealthy pay for the catastrophic state of public finances.

Casting aside more than a decade of New Labour ideology, the government broke a key election manifesto promise by announcing an increase in income tax for those earning more than £150,000.

Alistair Darling, the Chancellor, also announced that the highest earners will lose valuable tax breaks on pension savings, as part of a package of measures that will see the tax grab from high earners raising up to £5.5 billion a year - an average of £18,333 annually per person.

The surprise new measures - which mean Britain will have the highest top rate of any major economy in the developed world - came as Mr Darling was forced to lay bare the true extent of Britain's levels of borrowing in his Budget.

In the worst economic forecast since the Second World War, he said he planned to borrow another £700 billion over the next five years, taking the national debt to £1.4 trillion.

Mr Brown and Mr Darling were accused of indulging in party politics at a time of national crisis by seeking to exploit the divide the Tories' on tax policy.

It was also suggested that the Prime Minister was returning to Old Labour policies designed to shore up Labour's core vote ahead of an election next year that he is on course to lose.

Labour MPs in the party's heartlands will welcome the move and ministers will argue that taxing those on very high salaries is popular among many voters.

But in raising the top rate of tax the government risk alienating the middle class voters that swept Tony Blair to power in 1997.

Michael Fallon, the senior Conservative MP and member of the Treasury Select Committee, said: "This is undoubtedly a bit of class war from Gordon Brown. He is stoking up Labour MPs and the party faithful before the election but there is no doubt this is the end of New Labour.

"The higher rate of tax was a compact between both main parties. It was agreed that the certainty that the 40p rate gave was good, but that has now been shattered once and for all."

The new top rate of income tax will be brought in next April, before the likely May election. Gordon Brown had promised in the 2005 election manifesto not to raise to the top level of tax.

It led to fears that there will be a "brain drain" from Britain as higher earners are driven away by punitive levels of tax.

Mr Brown has consistently claimed to have ended "boom and bust". But the true state of public finances and the amount of government borrowing needed to repair them shocked many.

The Government first borrowed money in 1692. It took 300 years for the level of Public Debt to reach £165 billion in 1992, and yet is £175 billion this year alone. When Labour took office in 1997, debt was £350 billion.

Mr Darling - whose second budget co-incided with the release of figures showing unemployment had risen to 2.1 million - claimed that the government's books would be balanced within a decade.

But the Chancellor was accused of painting a rosy picture of how quickly Britain would return to growth. He told the Commons the country would be out of recession by the end of this year.

A report by the International Monetary Fund (IMF) suggested the British economy would continue to decline next year.

As a result it is feared the final borrowing figures could be even higher, since Mr Darling based his plans on an assumption that the UK economy will recover much more sharply than other economists believe.

After Mr Darling's 50 minute speech to the Commons failed to rouse the Labour benches, David Cameron, the Conservative leader, said Mr Brown was leading a "government of the living dead".

George Osborne, the shadow chancellor, said: "Labour is relying on optimistic growth forecasts that have been contradicted by the IMF, and their tax rises fall on the many, not just the few.

"Britain is being overtaxed to pay for Gordon Brown's incompetent overspending."

The Confederation of British Industry, the country's leading business group, also attacked the Budget for failing to grasp how Britain was going to recover from the recession. Richard Lambert, the CBI director general, said: "The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI's preliminary judgement must be that it does not."

He said the Treasury had missed an opportunity to look at curbing public sector pay and pensions.

The move to a 50 per cent top rate of tax - which also effects income from share dividends - marks a departure from the era of New Labour in which Tony Blair and Mr Brown sought to woo Middle Britain by keeping the top rate of tax low. The 40 per cent rate was a staple of consecutive Labour manifestos.

Yvette Cooper, the Chief Secretary to the Treasury, tried to defend the move. She said it was the right response to "exceptional circumstances".

Asked whether the hike represented a breach of the 2005 General Election commitment not to raise the "basic or top rates of income tax in the next parliament", she said: "Well, it is. We never expected that we would have this kind of global financial crisis on a scale not seen for almost a century.

"In those circumstances, what we need to do is to make sure we are being fair."

Mr Darling hopes that the measure will raise £7 billion a year in five or six years time. But financial experts questioned whether the hikes would bring in the revenue predicted by the Treasury.

Robert Chote, director of the independent Institute for Fiscal Studies, said that the tax hike may actually lose the Exchequer money.

He said: "If you look at what happened when higher rates were last changed in the 1980s, that might lead you to suggest that such a move might actually lose you revenue, rather than gain it, as people actually declare less income for tax."

Sean Drury, of accountants PricewaterhouseCoopers, warned that the wealthy might decide to leave the country. He said that from next Spring the UK would rank 18th among the G20 economies in terms of income tax and social security rates for senior executives.

He added: "Countries like Switzerland will look increasingly attractive to some of the people in the key industries needed to lead the UK out of the recession.

Mr Darling had told MPs that he wanted the City of London to retain its status as a centre of financial services, but Stuart Fraser, policy chairman of the City of London Corporation, said the new higher rate could put the Square Mile at a disadvantage compared with financial centres overseas.

He said: "The new top rate of income tax at 50 per cent may damage the City's competitiveness - we operate in a global market for talent, and that talent is expensive."

David Cameron will now come under pressure from his own MPs to oppose the new 50p rate. The Tory leader attacked the move in the Commons, but he will not agree to reverse the measure if he wins the election.

Mr Osborne wants to make sure the next lection is fought on tax rises for the many - the proposed national insurance rise that his scheduled for after the election - and not tax rises for the few.

Source: The Telegraph

Alistair Darling poised to slash spending and raise taxes in Budget

Alistair Darling is considering fierce public spending curbs and deferred tax rises to convince the markets that Britain will emerge eventually from its massive debt.

The Chancellor is likely to predict in next Wednesday’s Budget that the economic recovery will start around the turn of the year. But he will have to decide within days how far to go in highlighting deferred spending economies and tax rises after 2011 and how much to save up for the Pre-Budget Report in November.

The Government’s borrowing isexpected to balloon to almost £175 billion a year in each of the next two years as the recession triggers a surge in public spending and a slump in tax payments.

The scale of the Treasury’s slide into the red, expected to be confirmed by the Budget, is set to push the deficit to as much as 12 per cent of GDP — a level not seen since the Second World War and far above an 8 per cent peak reached after the 1990s recession under the Conservatives

The latest Treasury survey of City economists’ forecasts, released yesterday, shows an average prediction that public borrowing will hit £160 billion in 2009-10 (compared with the Chancellor’s £118 billion projection last autumn) and rise to £167 billion in 2010-11.

Mr Darling is expected also to focus on environmental measures as part of the recovery. Today, as the Cabinet meets in Glasgow, ministers will say that discounts as high as £5,000 could be made available to help buyers of electric cars. Gordon Brown has said that there should be a roadside network of charging points for cars and incentives for carmakers.

Treasury insiders say that while the Chancellor is determined to show that his “direction of travel” is towards balancing the books over several years, he will not want to do anything to jeopardise the recovery. Most economists believe that the public finances cannot be restored to health without big spending cuts, tax rises or both.

One Treasury insider said: “There are two fiscal events each year with the Budget and Pre-Budget Report \ and we can use each to make adjustments. There has to be clawback — we know that. The key judgment is when to announce it.”

The extent of these — on top of those already announced, such as the new top rate of income tax of 45 per cent for people earning more than £150,000 — will be determined in discussions between Mr Darling and Mr Brown.

Most of the focus after the last PBR was on future tax rises. But Mr Darling slashed the growth in spending after 2012 from an already painful 1.8 per cent to 1.2 per cent. He could go even farther to show his seriousness about setting the finances straight once the shocks to the world economic system have calmed. That will mean cuts of billions from planned programmes.

Mr Darling will make a drastic revision of his growth and borrowing forecasts from the PBR, arguing that the downturn has been far worse than experts expected. He will admit that his hopes last November that growth might resume by the middle of this year have been dashed and he is likely to say that the economy will contract overall by about 3 per cent this year, the worst performance since the Second World War.

The City forecasts that the economy will shrink by 3.7 per cent this year and grow by just 0.3 per cent in 2010.

Source: The Times

Gordon Brown has lost all moral authority

So this is the way New Labour ends - in a shower of immorality. Sure, the expenses scandals were bad enough, but Brown could wriggle out of those; promise a review; and wait for the revelations to appear about Tory and Lib Dem MPs. But Damian McBride and "Smeargate" is something else; something altogether more final. The public is getting its clearest glimpse yet into the workings of the Brown machine. And it's a grim sight.

It's always puzzled me how Brown has managed to perpetuate the "son of the manse" shtick. Read any biography of the man - I'd recommend Tom Bower's - and the truth is clear: his is a political career built largely on gangsterism and deceit. Yet there's always been this abiding impression that he's just industrious ol' Brown, getting on with the job. That's why the ad-men could produce those "Not Flash, Just Gordon" posters in 2007, and why he could take over from Blair with excited talk about "no more spin".

But now that the inner circle of bruisers, opportunists and freaks has been properly exposed, all that lies shattered. Even though Brown almost certainly didn't know about the McBride emails, his reliance on this grubby operation makes him guilty by association. And, on the back of recent scandals and ahead of scandals yet-to-come, his claims to moral authority are finally being revealed for what they are: an illusion.

Strategically, this leaves the PM floundering. It's been suggested that a central plank of his post-G20 approach was to "inject a moral dimension into the debate". But how can he manage that now? Can he really lambast the Tories for "not caring" about the unemployed and the dispossessed, when one of his closest advisers spent time trying to sow false rumours about George Osborne's wife and Cameron's medical history? Well, he can try; but I doubt it will have quite the same impact. And, in turn, that leaves a moral dimension for the Tories to occupy.

In short: if - when - Brown loses the next election, the events of yesterday will be a contributing factor. Guido, take a bow.

Source: The Spectator

Gordon Brown has lost all moral authority

So this is the way New Labour ends - in a shower of immorality. Sure, the expenses scandals were bad enough, but Brown could wriggle out of those; promise a review; and wait for the revelations to appear about Tory and Lib Dem MPs. But Damian McBride and "Smeargate" is something else; something altogether more final. The public is getting its clearest glimpse yet into the workings of the Brown machine. And it's a grim sight.

It's always puzzled me how Brown has managed to perpetuate the "son of the manse" shtick. Read any biography of the man - I'd recommend Tom Bower's - and the truth is clear: his is a political career built largely on gangsterism and deceit. Yet there's always been this abiding impression that he's just industrious ol' Brown, getting on with the job. That's why the ad-men could produce those "Not Flash, Just Gordon" posters in 2007, and why he could take over from Blair with excited talk about "no more spin".

But now that the inner circle of bruisers, opportunists and freaks has been properly exposed, all that lies shattered. Even though Brown almost certainly didn't know about the McBride emails, his reliance on this grubby operation makes him guilty by association. And, on the back of recent scandals and ahead of scandals yet-to-come, his claims to moral authority are finally being revealed for what they are: an illusion.

Strategically, this leaves the PM floundering. It's been suggested that a central plank of his post-G20 approach was to "inject a moral dimension into the debate". But how can he manage that now? Can he really lambast the Tories for "not caring" about the unemployed and the dispossessed, when one of his closest advisers spent time trying to sow false rumours about George Osborne's wife and Cameron's medical history? Well, he can try; but I doubt it will have quite the same impact. And, in turn, that leaves a moral dimension for the Tories to occupy.

In short: if - when - Brown loses the next election, the events of yesterday will be a contributing factor. Guido, take a bow.

Source: The Spectator

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

Gordon Brown's House Price Boom and Bust

Have a look below at what we all know but Gordon Brown is hoping we forget!

How will Gordon Brown pay back the national debt?

As many economists start to turn vaguely positive on the UK economy we may be on the verge of a recovery in business levels. While this news has, and will continue to be, well received by business leaders and the stock market, there are still severe concerns as to how Gordon Brown will pay back the national debt which is literally crippling the UK budget.

While many are awaiting the announcement of this month's budget, it is the short to medium term situation which is beginning to cause most concern amongst experts. Nobody is quite sure how much UK debt has been accumulated over the last 12 months as Gordon Brown has been literally throwing money at the system and UK banking companies. Despite repeated requests by opposition parties and business leaders, the Treasury has been unable to confirm the exact position and balance sheet of the UK.

Whatever the exact figure may be there is no doubt that UK taxes will increase in the short to medium term with some analysts suggesting this could cause a significant drag on the recovery of the UK economy. Until we know the exact balance sheet of the UK it is impossible to suggest any course of action and when consumers and businesses may be hit by increased tax bombshells.

PM's Just Saved Apocalypse for Later

HALLELUJAH! Gordon’s saved the world. But what about Britain?
To be fair, the Prime Minister pulled off a brilliant propaganda coup — and delivered real help for stricken economies around the world.

The good news is that bankrupt countries in Eastern Europe will not go bust or — more importantly — drag everyone else down with them.

That’s because the International Monetary Fund — the world’s pawn shop — can now print its own money and bail out basket-case economies such as Hungary.

“So, no Apocalypse Now,” says my City analyst.

The bad news is that Britain looks like becoming one of those basket cases.

Taking a begging bowl to the IMF would be a grotesque humiliation for a nation so recently rated as the world’s fourth-largest economy.

Yet in perhaps his most outrageous spin operation ever, Prince of Darkness Peter Mandelson is already smoothing the path.

Britain is not “head of the queue” for IMF money, he told C4 News. But there would be “no stigma” for Britain if we were.

An unnamed minister, who must surely be Mandy, later told a newspaper: “Previously, a country would only go to the IMF if they were in a very bad state. It was a bit like going to Accident and Emergency to get urgent help. This new facility is like getting wellbeing care or going to a spa to recuperate.”

Before you swallow that nonsense, listen to Simon Johnson, the IMF’s former chief economist.

“With all due respect to Gordon Brown and his ministers, they need some help right now,” he told the same C4 programme.

“Your economy — the UK economy — is in big trouble.”

Who do you believe?

I don’t want to rain on Gordon Brown’s parade, but I lean towards Mr Johnson — things are going to get much worse before they get any better.

My “Apocalypse Deferred” City source sees big trouble ahead. Any “green shoots” risk turning sickly yellow under the pall of national debt.

“The IMF is right,” he says. “The UK economy is in trouble and to suggest America is to blame is just daft.

“We are borrowing massively, printing money. We have a higher household debt ratio than America and rely more than anyone else on financial services, which are in trouble.

“As a result, Sterling is a risky currency.

“Big investors looking for safe havens for their clients’ billions are worried about the Pound. If they switch to another currency, Britain is in trouble.

“There is a 25-per-cent chance of a run on the Pound in the next six months. That’s a shockingly high probability.”

Some optimists say America will start recovering next year — but not debt-laden Britain.

After his G20 triumph, the Prime Minister will be pleased by a three-per-cent bounce in share prices — and in Labour’s poll ratings.

He will also welcome dodgy claims that house prices are rising again. All three are likely to be “blips”.

Indeed, the Halifax have already trashed the evidence of a housing revival, with figures showing a 1.9 per cent FALL in prices last month.

In a remarkable outburst of candour, Chancellor Alistair Darling blames predecessor Gordon Brown for castrating the watchdogs who might have saved our banks.

Now, on the eve of this month’s crucial Budget, he warns we are nowhere near recovery.

“It’s worse than we thought,” he says.

Mr Darling says the economy will shrink in its worst performance since World War II. Unemployment will keep soaring — perhaps even doubling to 4million.

Asked if there was any reason for cheer, the Chancellor confessed: “There is some way to go yet.

“We have to be realistic. You cannot — you must not — build up false hope.”

This bleak scenario is a million miles from the PM’s beaming optimism.

As the G20 packed up, he claimed a “new world order”, backed by a mythical trillion dollars in spending money. Don’t believe it. As Chancellor, Gordon Brown was famous for his thimble-and-pea tricks.

As in so many of his smoke-and-mirror budgets, these numbers simply don’t add up.

FRANCE and Germany were pleased with their G20 pincer attack on the “Anglo-Saxon economies” – Britain and America.

Pint-sized egotist Nicolas Sarkozy resents popular Barack Obama almost as much as he does First Lady Michelle for eclipsing his wife Carla Bruni.

America will ignore him. But he and Germany’s Angela Merkel have forced concessions out of Britain on the way we do business.

In return for his “triumph” last week, just how many economic levers has Mr Brown surrendered to Brussels?

Source: TREVOR KAVANAGH

Brown's illusory G20 deal

Britain has as its Prime Minister a master of political illusion. He may not be much of an orator, but there is no one better at dressing up old money as new. If the G20 nations wanted to fake progress, to spin a $1.1 trillion figure while committing no new money at all, then Gordon Brown is their man. “This is the day that the world came together to fight the global recession, not with words but with a plan,” said our Dear Leader. Well, let’s have a closer look at this supposed plan…

1) “Making available an extra $1 trillion”. Ahh, those Brown verbal tricks. What does “make available” mean? Is it guarantees, promises, statement of intent? Real spending? Not a penny of cold hard cash has been pledged by anyone. The sum is concocted by taking the IMF’s pre-existing $500bn target for its bailout fund (a target it still hasn’t met), adding another $250bn to the target. And, then, we add a $250bn fund which the IMF would create by printing its own special money.

2) IMF Funds “treble to $750 billion”. Very fishy. We heard from the IMF on Valentine’s Day that it wanted double its rescue fund to $500 billion – then it said it wanted even more. So where has the extra $250bn come from? Who has stumped it up? No one, it appears - it's just a target. And then the IMF will print its own money, in its own pretend “currency” (called Special Drawing Rights or SDR), and then allow its members to swap this for real money. The idea was once rejected by US Congress, but Obama thinks he won’t need congressional approval now the limit is kept to $250bn. But to be clear: no one has stumped up any new cash. It’s a little quantitative easing for the world – aimed, I suspect, at Eastern Europe. China will be happy as it wants SDRs to replaced the US dollar as a reserve currency.

3) Old pledges dressed as new. Brown gave a breakdown of who had stumped up: Japan, he said, contributed $100bn to the IMF. Yes it did: in January. The EU has agreed to contribute $100bn, he added. We know: this was announced at the last EU summit. Brown said China has chipped in just $40bn, and this appears to be new. But given the size of Beijing’s $2 trillion piggy bank, that is a rather derisory amount (and won’t buy it a seat on the IMF board). The Brazilians had thought China was good for $100bn.

4) Double counting. The Dear Leader has good news. “We are going to act decisively to kickstart international trade” But how? “We will ensure availability of at least $250 billion over the next two years." Note that “over two years” means that this is $125bn, double counted. Why not make it four years, and whack up an extra $1 trillion? It’s just a joke. Nor is this real cash – it comes from trade insurance schemes to protect importers and exporters. It’s not money being spent by governments. Pure Brown-style fiscal conjuring.

5) Tax havens. “We have agreed there will be an end to tax havens that do not transfer secrecy on request.” This is a piggybacking on the long-running OECD campaign against tax havens – this is not a G20 initiative. Brown solemnly announced the OECD would publish a list of non-compliant nations, as if this were a breakthrough. It has been doing this for the last year – here is a list of the most recent such announcements.

6) “The Washington consensus is over”. A curious aside from Brown – and a dog whistle to the Soros/Naomi Klein school of economics. The so-called “Washington Consensus” doesn’t refer to any formal economic protocol. It is used by the likes of Soros to denote what he calls ‘free market fundamentalism’. The academic who coined the term talks about its abuse here.

7) Ban on new trade barriers. Yeah, right. They agreed this in November and, since then, 17 of the 20 countries have increased trade barriers.

8) Brown’s gold advice: “I’ve been proposing this to the IMF for ten years”. He was certainly proposing in 1999 that the IMF sold gold – then priced at $278 an ounce. Luckily, the IMF ignored Brown and gold is now $890 an ounce. Shame he didn’t take the IMF’s advice when it was warning his borrowing would end in tears.

9) “For the first time, we have come together to set principles for the global finance system.” As far as I can determine, all they have agreed is that banks and hedge funds should be regulated – but don’t say how. Ergo, it’s meaningless.

10) No fiscal stimulus. It’s mentioned twice in the 3,080 word document – there wasn’t one. Both Brown and Obama wanted the world to contribute new money. They failed. There was none of the big agreement that Brown led us to believe. There was a split, as evidenced by the Franco-German minority report yesterday. But still it’s a big summit, a deal was done (albeit a fairly nebulous one) and the threatre was fine.

On a presentational basis, this his has worked out well for Brown. I suspect the G20 will be written up well tomorrow, just as his Budgets are always written up well – “2p tax reduction!” – before we all realise we’ve been swindled. So look out for triumphant declarations of “$1.1 trillion to save the world” in tomorrow’s papers. Listening to Brown today, it was as if he were giving a Budget for the world. And I suspect the world is about to learn how illusory a Brown promise.

Source: Fraser Nelson @ Spectator

Max Keiser on Radio 5 Live

Max Keiser discusses the fall out of the G20 meeting in London

UK has run out of money to pump into economy, OECD warns

**Thinktank urges Bank of England to hold interest rates near zero until end of 2010 **Predictions include UK economy shrinking by 3.7% this year and unemployment hitting 10%
**Quantitative easing plan wins backing


The UK government cannot afford to pump more money into Britain's struggling economy, the Organisation for Economic Cooperation and Development warned today, piling further pressure on Gordon Brown ahead of the G20 summit in London.

Echoing comments made by the Bank of England governor, Mervyn King, the OECD said Britain's worsening budget deficit meant the government had little room to cushion the impact of the recession if it turned out to be deeper than expected.

The government is already expected to have to borrow at least £118bn in 2009 to balance the books - equal to 9% of gross domestic product, an all-time record.
"The room for additional fiscal manoeuvre to respond to worse-than-expected activity developments is therefore limited and new measures would need to be accompanied by detailed and credible fiscal consolidation plans in order to ensure that confidence is not eroded," the OECD said.

The Paris-based thinktank urged the Bank of England to hold interest rates near zero until the end of next year to support the economy.

Until last week, the prime minister, Gordon Brown, appeared determined to announce a new stimulus package in the 22 April budget, but he was forced to backtrack after King warned against a giveaway.

Opposition politicians seized on King's warning to intensify the pressure on Brown, who is chairing the G20 summit to coordinate international steps to tackle the global economic crisis.

For now, Britain is implementing a discretionary fiscal stimulus worth 1.4% of GDP, on top of increased spending on social benefit payments.

The Bank is also creating £75bn to buy government bonds through a quantitative easing programme to boost growth and stave off deflation, which the OECD said could turn out to be more successful than expected.

"Monetary and fiscal policy could provide a stronger stimulus to growth, although the magnitude of their impacts, especially that of quantitative easing, are currently difficult to gauge," the body said.

The OECD is predicting the UK economy will shrink by 3.7% this year, the sharpest rate of decline since the second world war, and by 0.2% next year, although a recovery should start later that year. Unemployment is likely to peak at 10%, up sharply from the current 6.5% rate.

"While the OECD projections make depressing reading, we suspect they may even be a little on the optimistic side," said Howard Archer at IHS Global Insight, who thinks the economy could suffer a 4% contraction this year and a further one of 0.4% next year.

The OECD's forecast for British growth is slightly less grim than that for other big economies. It predicts the United States will contract by 4%, the eurozone by 4.1% and Japan by 6.6%.

It said that governments may be able to justify more spending in certain circumstances. "If economic circumstances deteriorate significantly more than projected, further fiscal measures would be warranted," it said in the report.

The OECD fears the world's 30 richest countries face a combined jump in unemployment of 25 million people in the current economic crisis, by far the biggest and swiftest rise in the post-war period.

Ratings agency Fitch also issued a grim forecast today. It downgraded its previous forecasts for economic growth in 2009 and is now predicting the "widest and deepest global recession" since the second world war.

Source: Guardian

Bailout Economics: The Politics of Self Destruction

This article, written by Alex Merk, takes the American perspective of Government bailouts. Given that Gordon Brown has gone down the same road, this piece also reflects the situation of the UK as well.

Bailout Economics

Publish at Scribd or explore others: Periodicals & Report bank bailouts financial crisis

MEP Hannan Gives Gordon Brown a Dose of The Truth

Daniel Hannan, MEP for South East England, gives a speech during Gordon Brown´s visit to the European Parliament on 24th March, 2009.

Hannan tells Gordon Brown the truth which he will not accept but we all know to be true.

Priceless!

King correct to warn Labour against more spending

If Tuesday's bizarre outcome on the cost of living was sustainable it might, just might, reveal that the economy was stronger than we thought and demand had not completely evaporated but was still capable of applying some upward pressure to prices.

However, RPI at zero and CPI at 3.2pc reveal as much about flawed statistical measures as any change in how the economy is behaving. The inflation figures were strong only in the same way that a fish thrashing in the bottom of a boat can be surprisingly energetic, but not something that lasts.

The main reason RPI did not fall into negative territory (or deflation) and that CPI was still more than a full percentage point above the target 2pc level, was the weakness of sterling. We face the far more gloomy outcome of a shrinking economy with falling wages cursed by rising prices fuelled by escalating import costs. The reason for our weak currency? The disastrous state of the UK's public finances and the £118bn plus Alistair Darling will have to borrow in the next financial year.

A falling pound ought to be good news for exports but even our foreign earners won't be enough to help us out given how quickly unemployment is rising.

Falling housing and energy costs are welcome and will help matters. Being cheery, the best outcome will be only a short period of deflation which will be reversed as the economy picks up. I'm sorry if this sounds like wishful thinking but it's the best I've got. Mervyn King, Governor of the Bank of England, is a bit more upbeat, suggesting the benefit of recent interest rate cuts and its quantitative easing programme are still to come.

Whether you believe him or not on this point, King was right on Tuesday to warn the Government over further public spending splurges. Given the long term damage Labour has helped cause to the economy, and sterling, we really can't take much more punishment.

Bank-bashing policy flawed

Top bankers at Barclays saw £95m wiped off their share-based pay during 2007 and 2008. Bob Diamond saw his total pay fall from £21.1m in 2007 to £250,000 in 2008.

But let's keep the celebrations brief. Yes, City pay needs reform to align rewards with long term performance but at the heart of the Government's bank-bashing policy is a flaw.

It wants banks to take less risk and therefore pay their people less. But it also wants them to lend more, and take more risk. It can't have it both ways.

Source: Damian Reece, Telegraph

China in threat to shatter hopes of G20 summit deal

China may scupper hopes of a landmark deal at the G20 summit in London by opposing new rules for the world's financial system designed to prevent a repeat of the current crisis.

As the Prime Minister played down differences between the United States and Europe over whether EU nations should spend more to combat the recession, China emerged as a possible stumbling block to an agreement at the 2 April meeting.

One proposal – backed at yesterday's summit of EU leaders in Brussels – is for tougher global financial regulation including a crackdown on tax havens, hedge funds and private equity firms and an end to pay and bonuses which encourage excessive risk-taking. But Jose Manuel Barroso, president of the European Commission, said: "The main problem will come from other countries, like China for example, that don't have the culture of a common setting of rules."

Mr Brown insisted China was playing a constructive part in the G20 negotiations. "Any suggestion that China does not want a positive outcome for the G20 discussions is wrong," he said. But he admitted he would need further "private discussions" with Premier Wen Jiabao before the meeting. British officials were puzzled by Mr Barroso's intervention, pointing out that China had showed it could abide by international rules by joining the World Trade Organisation.

The Prime Minister said the EU talks had "laid the foundations" for a successful London summit after its 27 leaders closed ranks to avoid sending a negative signal to the financial markets. He said: "We have also agreed on the importance of doing what is necessary to restore jobs and growth by the fiscal actions we take.

"We are agreed on the importance of maintaining vital public investment at this time as we respond to the current crisis and strengthen our economies for the future."

Although the EU rebuffed US calls for a further economic stimulus now, some leaders made clear in private talks they have not ruled out action in future if necessary. They do not want to be seen by voters as being "bounced" into policy changes by demands from Washington, the EU or the G20.

The EU meeting agreed to call on the G20 nations to double to £344bn the emergency funds made available for the International Monetary Fund (IMF) to bail out countries during the crisis. EU leaders pledged to contribute an extra £69bn in loans to the IMF.

Source: The Independent

UK Economy to Contract in 2010

BRITAIN is the only major country whose economy will SHRINK next year, a damning forecast said last night.

The International Monetary Fund predicts a 0.2 reduction. But it expects the US economy to grow by the same amount, the Eurozone by 0.1 per cent, Asia by 5.8 per cent and Latin America by 2.3 per cent.

The forecast is a blow to PM Gordon Brown. But Ministers will say it shows the UK recovering from this year’s estimated 3.8 per cent shrinkage.

Shadow chancellor George Osborne said: “This forecast is further evidence that Gordon Brown’s economic model is fundamentally broken and his policies on the recession aren’t working.”

Source: GEORGE PASCOE-WATSON

Gordon Brown and Bernard Madoff are separated by a single detail – Bernie's pleading guilty

What's the difference between Bernard Madoff and Gordon Brown? Answer: one has drained fortunes from gullible victims, plundering their income and savings to create an illusion of prosperity. The other is going to jail.

Mr Madoff has thrown in the towel. His Ponzi scheme, whereby he needed to suck in ever greater quantities of other people's money in order to maintain a semblance of competence, collapsed under the weight of undeliverable expectations. Nobody knows for sure how much has gone missing, but Wall Street scribes are calling it a $65 billion fraud.

Not bad for peddling fresh air. It is, however, a nickel-and-dime swindle when set alongside the 12-year con trick perpetrated by Mr Brown on British taxpayers. That, too, has been a form of Ponzi, but with many more zeroes and little chance of the mastermind ending his days in what Americans call Crowbar Hotel.

Source: PoliticoUK Blog

Read in Full Here

Can Brown Afford to “hang” with Obama?

For the Prime Minister, yesterday`s comments from President Obama in Washington may be a case of Be careful what you wish for! President Obama stated that countries must take concerted action to revive the global economy and spur on new economic growth. Prior to his trip to the US last week, these are the kind of comments that Gordon Brown had been eager to hear from the US President.

The question Brown now faces, as he heads into the upcoming G20 meeting in April, is can the UK actually afford to take a leading role alongside Obama. As Brown headed to Washington he must have relished the opportunity to be seen by the world as Obama`s partner in saving the global economy! Brown and his top advisors must have thought this would be their ticket to a bump in the polls which would spur the PM and Labour onto a great election victory next year.

The hitch in this plan is that Obama believes the way to save the global economy is to spend, spend, spend – and then spend some more! For us in the UK the cupboard is already bare. Yesterday Alistair Darling started to lay the ground work to prepare us for next month’s budget. Darling signalled that we would not be seeing any new fiscal stimulus plans in the budget and called for restraint. Restraint is something that is in very short supply in Washington these days. On the day that President Obama signed another $420 billion of new spending in law - and before the ink had even dried - there was already talk in Congress of Stimulus 2.0.

This lays the backdrop for the coming G20 amid growing reports of a rift between the US and Europe. There`s no doubt that Brown wants to “hang” with Obama and the cool kids but in the end his pockets will just not be deep enough.

The Oracle with Max Keiser - March 6, 2009

PART 2 PART 3

This weeks topics:

**Gordon Browns Global New Deal
**Great Depression II
**Right Wing Protests Against Obama's Plan
**U.S. States Could go Bankrupt
**AIG / Goldman Sachs Never Ending Bailout
**Global leveraged Ponzi scheme
**Citigroup heading for Nationalisation

Special Relationship Not So Special

I think someone forgot to tell President Obama about this "special relationship" between the US and UK!

Here`s a Selection of Headlines From the Last Couple of Days.

***Obama's Blockbuster Gift for Brown: 25 DVDs

While the British prime minister presented Obama with uniquely historic gifts symbolizing America's relationship with England, the president gave Brown a set of movies.

***Obama's DVD gift to Brown - it's the thought that counts

The British press are appalled by Barack Obama's present of 25 DVDs for Gordon Brown. But could there be a message in the president's selection?

***President Obama Raids His DVD Collection For British Prime Minister

In the world of international politics, ceremonial gifts representing the host nation are often the drug of choice for visiting dignitaries. From ornamental swords to antique furniture, a US president can rake in dozens of items over the course of their administration.

***President Obama returns bust of Sir Winston Churchill back to Britain

***Barack Obama sends bust of Winston Churchill on its way back to Britain