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UK's Brown defends surge in government borrowing

 Britain's Prime Minister Gordon Brown speaks during a question and answer session at Imperial College in London,  Monday Oct. 27, 2008.  Brown said t...

BRITAIN BROWN ECONOMY

Britain's Prime Minister Gordon Brown speaks during a question and answer session at Imperial College in London, Monday Oct. 27, 2008. Brown said t...

British Prime Minister Gordon Brown will defend a surge in government borrowing and call for tighter regulation on financial instruments such as credit default swaps in a speech yesterday.
"The responsible course is to borrow now to maintain growth and output, and to reduce borrowing as a proportion of GDP as the economy recovers and tax receipts rise again," Brown will tell London academics and business leaders, according to extracts of the speech released in advance by his office.
Data on Friday showed the British economy shrank for the first time in 16 years in the three months to September, and the government has pledged to spend more to help people survive economic hardship as well as to provide billions of pounds to prop up ailing high-street banks.
But the plans have been criticised by some analysts for piling on new debt without any guarantee of success.
In a letter to Britain's Sunday Telegraph at the weekend, academics and leading economists for financial firms Lloyds TSB and Invesco said the spending risked seriously misallocating resources and stunting any recovery in the private sector.
The British government is likely to be Lloyds TSB's largest shareholder once its merger with HBOS goes through in January, unless private investors rediscover a taste for bank shares in the meantime.
Brown will also set out his ideas for financial market reforms in the speech, which he intends to discuss with German Chancellor Angela Merkel when she visits London on Thursday.
European Union ministers will discuss the bloc's position at a summit on Nov. 7 before a G20 meeting in Washington on Nov. 15, which will bring together advanced industrial economies and developing nations such as China and Brazil.
Brown will say that bank recapitalization and Bank of England interest rate cuts may not be enough to resolve the financial crisis, and that commercial banks need to start to lend to businesses and households again.


Updated : 2021-04-16 00:46 GMT+08:00