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U.K. Unveils Stimulus Plan

MELISSA BLOCK, host:

Today the British Government announced a plan that may sound familiar. It wants to spend billions of dollars on infrastructure and cut taxes in hopes of lessening the effects of the recession there. We heard similar ideas today from President-elect Barack Obama. NPR's Rob Gifford reports on the British plan.

ROB GIFFORD: One observer called the announcement today an old-style, pre-election giveaway. Well, there isn't an election due in Britain for another year and a half, but Treasury minister Alistair Darling clearly had politics in mind as much as economics as he announced the $30 billion stimulus package.

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There were plenty of giveaways - more money for seniors, increases in welfare payments, plus a cut of 2.5 percent in sales tax. Time to kick start the economy ahead of the Christmas trading period. Also, billions of dollars of state spending on roads, schools, and housing - all essential, Darling told a rowdy parliament, for getting the economy moving.

Mr. ALISTAIR DARLING (British Finance Minister): You can choose to walk away, let the recession take its course, adopt a swim or - sink or swim attitude, let families go to the wall. That is no action plan. Or you could, as I have decided, to support businesses, to support families by increasing borrowing, which will also reduce the impact and the length of the recession.

GIFFORD: Much of the payback has been deferred until after the next general election. Alistair Darling admitted the tax cuts now would mean future tax rises, including an increase in income tax for the highest earners to 45 percent. He said he expects the British economy to contract early in 2009 before starting to grow again later in the year. The opposition Conservative Party accused the government of creating a huge unexploded tax bombshell that will go off just as the economy recovers. On London's Oxford Street, shoppers Gillian Kylie(ph) and Sema Palmer(ph) didn't seem too impressed either.

Ms. GILLIAN KYLIE: You hardly see it. You know, it's not that much. It's only 2.5 percent, so it's not a lot. And the spending will go up then the following year. The taxes will go up the following year.

Ms. SEMA PALMER: No changes with today's news on my life whatsoever.

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GIFFORD: If the shoppers weren't too impressed, the markets at least were. London's FTSE 100 Index of leading British shares closed up a massive 9.8 percent. Rob Gifford, NPR News, London. Transcript provided by NPR, Copyright NPR.

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