Gordon Brown hints at tax cuts for poor and support for green technology

In a speech in New York, the prime minister also suggested UK interest rates would be cut again soon
Graeme Wearden and Deborah Summers
guardian.co.uk, Friday November 14 2008 14.58 GMT


Gordon Brown today said that tax cuts aimed at low-paid workers and support for green technology had to be key parts of the response to the financial crisis, and also suggested that UK interest rates would be cut again soon.
In a speech at the Council on Foreign Relations in New York, the prime minister called on other world leaders to join a global fiscal and monetary stimulus package to address the financial crisis.
A key part of this package, Brown insisted, had to be a cut in taxation – especially for the poorest in society, who would help the economy by spending the extra money.
"What we have learned in the past is that when we cut taxes only half the money is spent, the rest is saved. Public works take time to come online," he said. "Those on low incomes are more likely to pass on the benefits of a tax cut."
The comments may be a hint of the contents of the pre-budget report, which Alistair Darling will present to parliament on Monday November 24.
The environment could also be a long-term beneficiary of the stimulus package, Brown said.
"Green technology could be what IT was in the 1990s, a big growth area."
Although Brown predicted that the world economy would double in size over the next 20 years, he also believes that a coordinated global approach is needed to prevent the financial crisis turning into a 1930s-style depression – when protectionism was rampant.
"The benefits of a financial stimulus package, temporary though they will be, will be all the greater if other countries take part," he said.
Earlier today the eurozone fell into recession for the first time in its history, in the latest sign that the world could be heading for a protracted period of economic contraction.
"This is not the time to prevent fiscal policy preventing economic policy working," said Brown, who pointed to the looming risk of deflation.
"The is no doubt that some countries might have zero inflation next year so there is no point having further cuts without a fiscal stimulus," he added.
A four-point plan to save the world economy
Brown hopes to persuade other leaders to sign up to a four-part package of cutting taxes, fixing problems in the international financial system, pumping more money into the IMF and an end to the deadlock over world trade.
"A new world trade deal is absolutely crucial, in my view, to send a message that protectionism is absolutely unacceptable," the prime minister insisted.
He also appeared to indicate that he would welcome another cut in interest rates by the Bank of England, which slashed the cost of borrowing by 1.5 points to 3% earlier this month
"There is scope for further cuts in rates, and that is an essential part of what we are doing," said Brown.
Environmentalism, not protectionism
The US government is under growing pressure to bail out its troubled car industry with billions of dollars of taxpayers' money, which has already concerned some overseas rivals.
Brown said that it was important to "help people into their next jobs while also keeping our economies open", which some observers saw as a possible hint to Barack Obama – who has been accused of taking a protectionism stance over the US economy.
The British prime minister was also praised for his handling of the crisis by former US Treasury secretary Robert Rubin, who hailed Brown as an "acclaimed leader" during a question and answer session after the speech.