Britain Unveils Plan to Ignite Its Economy

In an effort to kick-start Britain’s ailing economy, the Bank of England will cut its minimum lending rate by one percentage point to 7%, the lowest rate in nearly 15 years.

The rate cut was among several measures designed to combat inflation announced Thursday by Chancellor of the Exchequer Norman Lamont in his autumn statement before the House of Commons. Conservative Party members cheered the announcement, and the Financial Times stock market index rose 29 points.

Included in the economic package is the junking of an $800 purchase tax on new cars--a move that will please the depressed auto industry.

But Lamont imposed a harsh 1.5% ceiling on public-sector pay raises to allow expenditures elsewhere designed to stimulate economic growth.

The Labor Party opposition complained that the costs of lifting Britain out of the recession will be borne mostly by the lowest-paid public servants.

Labor’s economic spokesman, Gordon Brown, declared in Parliament that the public “could never trust this government again.”

There were rumors that taxes or national health insurance rates would rise--but such increases were not part of Lamont’s package.

In housing, the government plan will provide more than $1 billion to buy up empty homes for the needy and to revive the declining housing market. Most major lending agencies said mortgage rates will drop today as a result of the interest rate cut.

Lamont also gave the go-ahead for London’s multibillion-dollar Jubilee subway line, which will provide a direct connection from the city center to the depressed Docklands area.

Although centered in South London, the subway project will provide jobs elsewhere in Britain for construction firms, suppliers and subcontractors.