Britain's Brown defends plan to keep economy afloat

By Adrian Croft

LONDON (Reuters) - British Prime Minister Gordon Brown defended his plan on Sunday to inject billions of pounds of borrowed money into the economy to try to stave off a deep recession, saying failure to act could cause permanent damage.

Brown's finance minister Alistair Darling will on Monday unveil a package of tax cuts and extra public spending expected to total up to 20 billion pounds ($29.70 billion) in an attempt to keep Britons spending and stop the economy seizing up.

The centrepiece will be a temporary cut in sales tax paid on many goods, several newspapers reported on Sunday.

They said the tax, known as value added tax or VAT, could go down to 15 percent from 17.5 percent for one or two years, giving a pre-Christmas boost to consumers' spending power.

Britain, buffeted by the global financial crisis, is on the verge of recession, with house prices slumping, unemployment rising and manufacturing output shrinking.

The cash injection will be paid for with borrowing, which could send Britain's budget deficit ballooning to around 120 billion pounds in the next financial year.

Opposition Conservatives say the government's plan is unaffordable, risky and unlikely to work.

"Doing nothing is not an option," Brown said in excerpts of a speech he will give at a business conference on Monday. "We need timely action now to prevent permanent damage."