British Labor Party unveils plan for record borrowing

"You can grow your way out of recession. You cannot cut your way out. We have made our choice," said Alistair Darling, Britain's chancellor of the Exchequer, or finance minister, presenting the budget to Parliament.

In addition to its crucial implications for Britain's faltering economy, the massive spending plan's success or failure could also determine the fate of Prime Minister Gordon Brown in national elections that must be held by May 2010.

Darling's budget calls for more than $1 trillion in borrowing over the next five years, which he said would increase Britain's public debt to 79 percent of the national gross domestic product by 2013, levels not seen since World War II.

While the unprecedented scale of the borrowing and debt left Brown's political opponents sputtering, Darling told Parliament that the spending package reflected "our core values of fairness and opportunity - and our determination to invest and grow our way out of recession."

Darling projected that the economy would shrink by 3.5 percent in 2009. And, to jeers from political opponents in the House of Commons chamber, he predicted that the British economy would begin to turn around by the end of this year, grow by 1.25 percent in 2010, and expand by 3.5 percent in 2011.

Brown has bet his political future on his economic experience and leadership on the crisis, both at home and internationally. He is a strong proponent of robust government fiscal stimulus, fueled by borrowing, to combat the global economic crisis, despite opposition from the Conservative Party.

Political opponents responded ferociously to the budget, saying it proved that Britain's recession is deeper than Brown and his Labor Party had previously acknowledged and accusing Brown of mismanaging the economy as premier and helping to create the financial crisis in his decade as chancellor.

"They have condemned us to years of unemployment and decades of debt," said Liberal Democrat leader Nick Clegg, noting that Brown's spending plan does not project balancing Britain's budget until 2018.

Conservative leader David Cameron, who will probably become prime minister if his party defeats Labor in the elections, drew a parallel with Labor's leadership during the 1970s and the famous "winter of discontent" in 1978-79, when strikes crippled the nation.

"The last Labor government gave us the winter of discontent. This Labor government has given us the decade of debt," Cameron said. "The last Labor government left the dead unburied. This one leaves the debt unpaid."

Brown's 50-percent tax on the top 1 percent of British earners - those earning more than $218,000 a year - was a surprise. Darling had announced in his prebudget report in November that the rate would rise from 40 percent to 45 percent. The 50-percent rate also comes into effect in 2010, a year earlier than Darling had earlier suggested.

Several financial industry analysts said the proposed tax increases could lead some financiers to flee Britain for more tax-friendly locations, further straining the financial industry.

Darling's tax increases ranged from the boardroom to the pub, including a 2 percent tax increase on alcohol and cigarettes. He also announced a 2 percent increase in the gasoline tax.