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October 13, 2009

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UK seeks US$25b from assets sale

THE British government is holding a fire sale of public assets, including the undersea Channel rail link, to raise 16 billion pounds (US$25 billion) as Prime Minister Gordon Brown warned yesterday 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 the United Kingdom in the middle of its worst slump in decades, public borrowing may hit a high 175 billion pounds next year.
Brown said 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 cooperation 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 slashing public spending would "cut the legs off from under the recovery and lead to higher deficits and debts down the line."
Non-financial 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 firm the Tote.
Meanwhile, local governments will sell another 13 billion pounds in assets such as business parks and leisure centers.
While Brown continued to stress caution about any economy recovery, he has recently sounded more positive.
In an interview published last Saturday, he said the economy would grow by 1.5 percent next year, more than many economists have foreseen.


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