Britannia Radio

TELEGRAPH   9.10.08
Someone will have to dig us out of all this debt   Tough measures 
will eventually have to be taken to reduce our spiralling budget 
deficit, says Robert Chote.

[- - - - Concluding paragraphs]

Dramatic though the additions to net debt implied by yesterday's 
announcements will be, they are not likely to be the decisive factor 
in shaping decisions on tax and spending over the next few years.

More important will be the increase in public sector borrowing and 
debt that we expect over the next couple of years - reflecting the 
weakness of the economy, the falls in the stock market and housing 
market, and what must be a weaker long-term outlook for City profits, 
salaries and bonuses.

In an ideal world, we would have faced the current turmoil with a 
smaller debt and a smaller budget deficit, but we did not. [Brown had 
put nothing aside for a 'rainy day'. We were weakened even before the 
crisis broke -cs]   No politician will increase taxes or cut spending 
significantly while the economy is on the floor, but the reckoning 
cannot be put off for ever.

The key question is how much of the extra borrowing we expect in the 
next couple of years will persist when the economy gets back to 
normal - whatever "normal" looks like once the smoke clears. On past 
evidence, we may well discover that we are left with an uncomfortably 
large "structural" budget deficit that needs to be reduced by a 
combination of tax increases and spending cuts. Messrs Brown and 
Darling may leave that task for whoever is Chancellor after the next 
general election.
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Robert Chote is director of the Institute for Fiscal Studies
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EU OBSERVER   9.10.08
UK calls for EU-wide rescue plan
LEIGH PHILLIPS

In a sharp about face, UK Prime Minister Gordon has written to EU 
leaders encouraging the creation of a "Europe-wide funding plan" to 
tackle the worsening financial crisis.  [What IS he playing at, now?  
The last thing we want, as the wor;d's most badly affected country, 
is to take on any responsibility for the stupidities of others -cs]

As recently as last week, Mr Brown said his country was opposed to 
any EU-wide rescue package.

Writing to French President Nicholas Sarkozy on Wednesday (8 
October), the British leader gave details on the UK's own £500 
billion (?630 billion) plan announced yesterday morning and added 
that a "concerted international approach" was needed. The letter was 
also copied to other EU government leaders.

Speaking to reporters after announcing the UK plan, Mr Brown said he 
had also spoken to the French leader.
"We have invited other European countries to consider proposals we 
have put to them this morning on medium term funding and are in 
active consultation about how we can adopt a European-wide funding 
plan," he said.

The UK plan that part-nationalises the country's banking sector will 
deploy £50 billion to buy preference shares in banks, £200 billion in 
short-term loans and an additional £250 billion to guarantee loans 
between banks.

Meanwhile, Mr Sarkozy, whose country currently chairs the bloc's six-
month rotating presidency, has suggested fresh EU actions will soon 
be taken.
"France and the European presidency are working on this global, co-
ordinated response and in the hours ahead we will have concrete 
results," he said during a conference in the southeast of the country.

The French president gave no details on the response and also seemed 
to suggest that the Brown plan was not a model for EU-wide planning, 
saying the UK bail-out was "perfectly adapted to the situation his 
country is in."

Separately, the French prime minister, Francois Fillon, told his 
country's parliament that France had set up its own fund to support 
banks, but that institutions would continue to be aided on an ad-hoc 
basis.

[------------ = Scant reports from other countries]
==================
Headlines elsewhere
Sky News  - Cash Boost Fails To Thaw MarketsB
The £50bn cash injection has showed no sign of restoring confidence 
in the financial system

Financial Times - Iceland suspends trading after bank seizures
Iceland's stock exchange suspended trading in all shares after 
Kaupthing Bank, the island's largest lender, became the the third 
bank to be taken into government ownership this week

-Britain's bail-out   [editorial]
The extra fiscal burden from the government's rescue proposals makes 
the need to set out a long-term plan to repair the public finances 
more acute

The Times - Darling cool on rescuing Icesave councils
Treasury refusing to bail out 45 local authorities who have lost 
around £1 billion deposited in failing Icelandic banks