Britain sells off public assets to boost finances
LONDON — The British government is holding a fire sale of public assets including the undersea Channel rail link to raise 16 billion pounds ($25 billion) as Prime Minister Gordon Brown warned on Monday that the country is “only halfway there” in overcoming the recession.
The sale of assets, which also includes the government’s 33 percent stake in European uranium consortium Urenco, spearheads the ruling Labour Party’s attempt to boost its economic credentials as it loses ground to the opposition Conservative Party ahead of next year’s general election.
Brown has maintained that the government must continue to spend its way out of recession, in contrast to the Conservatives’ position that spending cuts are necessary to prevent a blowout in the public finances and turn the economy around.
The asset sales will allow the government to raise money to pay down the public debt and the budget deficit — the gap between spending and revenues. With Britain in the middle of its worst recession in decades, public borrowing is forecast to reach a record 175 billion pounds next year.
Brown said that it was essential to continue fiscal stimulus alongside reducing the deficit.
“There is a fundamental divide within British politics,” Brown told an audience of economists in London. “Some people would withdraw the fiscal stimulus now, at a time when the economy is still in difficulty … I will fight over the next few months for what I believe.”
“I believe we have been proved right over the last year to restructure the banking system and make sure there is international co-operation and deal with the problem that arises from the lack of stimulus in the economy by taking fiscal and monetary action,” he added.
Brown said that slashing public spending would “cut the legs off from under the recovery and lead to higher deficits and debts down the line.”
The economy looks certain to be the dominant issue in a national election that must be held by the middle of 2010. Opinion polls give Cameron’s Tories a substantial lead over Brown’s Labour Party, which has been in power since 1997.
Nonfinancial assets to be sold over the next two years include the Channel Tunnel rail link, the Dartford bridge and tunnel crossing the River Thames and betting company the Tote.
Local governments will sell off another 13 billion pounds ($21 billion) in assets such as business parks and leisure centers.
The Liberal Democrat party, the secondary opposition in Britain, said the asset sales made sense in principle, but criticized the timing.
An earlier government attempt to sell off the Tote was abandoned after it failed to attract a high enough price.
“Attempts to sell off large amounts of government land into a very depressed market such as we have now would be frankly barmy,” said Liberal Democrat economy spokesman Vince Cable. “These asset sales should be basded on a financial calculation, not a political one.”
Business Secretary Peter Mandelson rejected the criticism, saying the market “is looking up.”
“Of course we’re not going to sell at the bottom of the market … we’re not idiots,” he told Sky News.
While Brown continued to stress caution about any economy recovery, he has recently sounded more positive.
In an interview published Saturday, he said the economy would grow by 1.5 percent next year, more than many economists have foreseen.
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