Financial Crisis Shows Global Reach in Sluggish British Economy

MARGARET WARNER: Well, the details actually are still being worked out. But what's been talked about -- it will be unveiled next Monday -- is, first of all, accelerated public spending on projects underway or planned having to do with infrastructure, hospitals, other projects like that.

The second, though, for an immediate boost is a significant tax cut. Some people are talking about $15 billion, which in this economy is significant, that will go before Christmas to the people most likely to spend it, and that is the lowest cohort of income-earners.

Now, that's a little problematic. Some of these people are some of the people who already are deep in debt, probably should use it to pay down their debt, but Brown very much wants to stimulate spending and help retail businesses.

That, of course, was very contentious in parliament today, with the conservatives attacking it saying, look, it's all going to be done on borrowed government money. If you give this tax cut now, there will be a tax hike down the future.

MARGARET WARNER: Yes, they are. And it's interesting. It's not only a debate within the U.K. It's also a debate within Europe.

And this is one reason why the issue -- the can was kicked down the road a bit, and that is that the French and the Germans, who don't even totally agree -- but I won't get into that -- are really for much tighter regulation of some of these global financial institutions and the way they do business.

Britain is a little more like the U.S. I mean, the U.S., Wall Street, and the City of London here in London -- that is their version of Wall Street -- have prospered and become global financial centers in part because regulation is fairly lax. And so there's a kind of delicacy with which they are approaching that issue.

JEFFREY BROWN: And yet, as we said, Gordon Brown has been one of the leaders pushing for some kind of coordinated effort.

MARGARET WARNER: Oh, yes, very much, on all fronts. I mean, the coordinated interest rate cuts, which have already taken place, and it's widely expected the Bank of England will do yet another one in December.

He originally had hoped for, I'm told, more coordination on the economic stimulus plans, but really someone in his office said to me today they came to realize that wasn't practical. I mean, every economy, every government has to decide in their own budget process when they can announce a further tax cut or spending hikes.

But they do, in terms of financial regulation of global institutions, big institutions like Citibank definitely, that requires global cooperation.

MARGARET WARNER: Yes, absolutely, Jeff. Today, the front page of the Financial Times had two big headlines. One was about the G-20, about pledging to boost growth, but the other one was about a new forecast from the so-called CBI, which is not a government group, but actually the Confederation of British Industries, which, unlike in September when they forecast anemic growth through 2009 -- I think it was .3 percent -- they now forecast a very sharp and deep recession through next year.

There's big graphs inside showing negative GDP growth through all four quarters of 2009, a little anemic uptick in 2010, big job losses, going from 1.8 million people to close to 3 million.

And there was another report talking about the number of jobs that were going to be lost in London alone.

But, you know, Jeff, you don't even have to listen to a forecast, just walking around the streets, going into businesses. I mean, yesterday, we were in one sort of high-end cafe that has a designer clothing store in the lower level. And the woman running that told me their sales were down to only one-quarter of what they had been in the month of October the year before.

She also told me that at her hair salon the bankers' wives used to come in and have, you know, blow-dries every single day, now just come in once a month for a haircut.

And we went to a very modest Italian restaurant in another area of Notting Hill where the owner, he looked busy to us, but he said, "Our business is really down." And he said, "And January is going to be much worse."

And that was a refrain we heard from a lot of people that, as bad as it is now, they expect it to get a lot worse after Christmas.

JEFFREY BROWN: All right, well, Margaret, that whets our appetite for more of your reporting in the coming days. We'll look forward to all that. Margaret Warner in London, thanks very much.

MARGARET WARNER: Thanks, Jeff.