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article imageU.K. Government to Raise Billions of Pounds Through Asset Sale

By Chris Dade     Oct 11, 2009 in Politics
Gordon Brown, Prime Minister of the U.K, will deliver a speech on Monday in which he will announce plans to raise an initial amount of £3 billion ($4.8 billion) through the sale of government assets.
According to Nasdaq, during the speech to be delivered at Bloomberg's offices in London, Mr Brown will confirm that assets such as the cross-channel rail link between Britain and France, the government-controlled bookmaker The Tote, the student loan book and the Thames river crossing/tunnel are to be sold off within the next two years.
Another asset set for disposal is the government's 33 percent stake in Urenco, a European consortium which operates a uranium enrichment service.
The asset sale is expected to raise £3 billion ($4.8 billion) and Reuters confirms that there are plans to raise a further £13 billion ($20.8 billion) from the sale of assets owned by local authorities within the U.K., the BBC and Nasdaq report that the additional £13 billion will actually come from the sale of real estate owned by government departments and agencies but the amount does not appear to be in dispute.
That real estate is said to be worth £220 billion ($352 billion) in total.
A report in 2007 has already committed the U.K. government to disposing of assets worth £30 billion ($48 billion) but the latest announcement is largely in response to the plans laid out by the Conservative opposition, set to form a new government following a General Election due for next year if the opinion polls are to be believed, to cut public spending.
However the likelihood of a budget deficit close to 12 percent of gross domestic product (GDP) come April 2010 is probably another motivating factor.
In April of this year Chancellor of the Exchequer (Finance Minister) Alistair Darling predicted that public borrowing in the U.K over the next two years would reach an unprecedented £175 billion ($280 billion).
A commitment to passing a Fiscal Responsibility Law, which would endeavor to make an annual cut in the budget deficit, has, says Nasdaq, already been made by the U.K. government and Prime Minister Brown is thought to favor legislation that would commit to a halving of the budget deficit within a four-year period.
Conservative plans to cut public spending include increasing the retirement age and freezing public sector pay in 2011. A spokesman for the party gave the following reaction to the plans due to be unveiled by Gordon Brown:As any family knows selling off things helps in the short-term and, given the state the country is in, is probably necessary but it is no substitute for a long-term plan to get the country to live within its means
For the Liberal Democrats Vince Cable questioned the wisdom of selling off assets when the markets in both shares and land are in his own words "very depressed".
If he should remain in office after next year's election Mr Brown, who succeeded Tony Blair as Prime Minister in June 2007, would likely still increase spending in the year 2010-2011 but in the years to follow the growth rate of public spending would be reduced. Mr Brown reportedly fears that a reduction in spending whilst a recovery is still in its early stages may run the risk of bringing that recovery to a halt.
Reuters notes that there would be a considerable impact on the debt-to-GDP ratio, for the better, if economic growth could be increased by one percent per year over the next ten years. Something that is perhaps not beyond the realms of possibility if there is a sustained recovery.
Mr Brown, for over a decade the Chancellor of the Exchequer, plans to use the proceeds of the assets sale to both fund new investment and pay off debt. And he has spoken of the "real risk of a lost decade of austerity" if spending cuts such as those envisaged by the Conservatives are implemented.
More about United Kingdom, Assets, Budget deficit
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