page_title: Premiership of Gordon Brown
section_title: Recession and fiscal stimulus
hierarchical_section_title: Premiership of Gordon Brown / Financial policy / Recession and fiscal stimulus
caption_attribution_description: English: Gordon Brown, Prime Minister of the United Kingdom, at the session Three Crucial Questions for the Prime Minister of the United Kingdom, Gordon Brown at the Annual Meeting 2008 of the World Economic Forum in Davos, Switzerland, on 25 January 2008.
context_page_description: The premiership of Gordon Brown began on 27 June 2007 when Brown accepted the Queen's invitation to form a government, replacing Tony Blair as the Prime Minister of the United Kingdom. It ended with his resignation as Prime Minister on 11 May 2010. While serving as Prime Minister, Brown also served as the First Lord of the Treasury, the Minister for the Civil Service and the Leader of the Labour Party. He was succeeded as Prime Minister by David Cameron after the 2010 general election.
  Brown's style of government differed from that of Tony Blair, who had been seen as presidential. Brown rescinded some of the policies which had been introduced or were planned by Blair's administration. He remained committed to close ties with the United States and to the war in Iraq, although he established an inquiry into the reasons for Britain's participation in the conflict. He proposed a "government of all the talents" which would involve co-opting leading personalities from industry and professional occupations into government positions.
context_section_description: With the onset of the recession, the UK government led calls to stimulate aggregate demand. Throughout 2008, a number of fiscal measures—including a £145 tax cut for basic rate (below £34,800 pa earnings) tax payers, a temporary 2.5% cut in Value Added Tax (VAT), £3 billion worth of spending brought forward from 2010 and a £20 billion Small Enterprise Loan Guarantee Scheme—were introduced. The cost of these measures, most of which were announced in the November 2008 Pre-Budget Report, was about £20 billion excluding counting loan guarantees. Further measures worth £5 billion—including training for the young unemployed and a car scrappage scheme which offered a £2,000 subsidy for the purchase of a new car in exchange for the scrapping of a car more than 10 years old—were announced in the 2009 budget.
  Despite entering the crisis with a low level of public debt—roughly 40% of GDP—and a moderate deficit compared to many European nations, the UK's ability to take discretionary fiscal action was limited by the burden of bank bail-outs on public finances. The tax revenue from financial services, which was conservatively estimated at 13.9% of UK tax income in 2007, fell alarmingly as the crisis affected bank profits. This contributed to a significant rise in the deficit to an estimated £175 billion (12.4% of GDP) in 2009–10 and a rise in the national debt to above 80% of GDP at its peak. The UK had significant automatic stabilisers which contributed far more than discretionary action and more than most other countries.
caption: Brown at the Annual Meeting 2008 of the World Economic Forum in Davos, Switzerland
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